In equilibrium,with exports equal to imports it must be the case that
A)leakages equal injections.
B)saving plus taxes equal government expenditures plus investment.
C)total expenditures equal GDP.
D)All of these.

Question

Quizplus · Accepted Answer

In equilibrium, with exports equal to imports, it implies that there is no net inflow or outflow of goods and services, which means that the total expenditures in the economy will equal the GDP. This satisfies option C. Additionally, exports and imports are also accounted for in the circular flow of income and expenditure, which includes leakages (saving, taxes, and imports) and injections (investment, government expenditure, and exports). Hence, in equilibrium, leakages must equal injections, which is satisfied by option A. Lastly, since both option A and C are true, we can conclude that option B must also be true, based on the national income accounting identity (GDP = C + I + G + (X-M) = S + T + M). Therefore, the correct answer is D.

In Equilibrium,with Exports Equal to Imports It Must Be the Case