In the open-economy ISLM model,the goods market equilibrium condition is
A)output = consumption + investment + government spending.
B)output = consumption + investment + government spending - tax.
C)output = consumption + investment + government spending + net export.
D)output = potential output.

Question

Quizplus · Accepted Answer

In an open economy, output is determined not only by domestic factors such as consumption, investment, and government spending, but also by international trade, specifically net export. Therefore, the goods market equilibrium condition is output = consumption + investment + government spending + net export.

In the Open-Economy ISLM Model,the Goods Market Equilibrium Condition Is