Which of the following word equations accurately represents the income identity for an open economy?
A) GDP = consumption + investment + government spending + imports - exports.
B) GDP = consumption + investment + government spending + net exports.
C) GDP = aggregate demand - net exports.
D) GDP = consumption + investment + government spending - net exports + imports.
E) None of the above.

Question

Quizplus · Accepted Answer

The income identity for an open economy is accurately represented by the formula GDP = consumption + investment + government spending + net exports, where net exports equal exports minus imports. This formula accounts for all components of an economy's output, including the net effect of its trade with other countries.

Which of the Following Word Equations Accurately Represents the Income