In a mixed open economy, which of the following affect the equilibrium GDP in the same direction? A)C_a, I_g, S_a, and M B)S_a, T, and M C)I_g, T, and C_a D)S_a, I_g, and X

Question

Quizplus · Accepted Answer

In a mixed open economy, the factors that affect the equilibrium GDP in the same direction are those that affect either the planned aggregate expenditure (PAE) or the aggregate supply. - S_a (autonomous spending) affects PAE, as it is not influenced by the level of income or output. An increase in autonomous spending will increase PAE and shift the aggregate demand (AD) curve to the right, leading to higher equilibrium GDP. - T (taxes) affects PAE, as an increase in taxes will reduce disposable income and consumption spending, thus reducing PAE and shifting the AD curve to the left, leading to lower equilibrium GDP. - M (imports) affects aggregate supply, as an increase in imports will reduce net exports and shift the aggregate demand (AD) curve to the left, leading to lower equilibrium GDP. Therefore, in choice B, S_a and M affect AD in opposite directions, but T affects AD in the same direction as S_a. Hence, only choice B is correct.

In a Mixed Open Economy, Which of the Following Affect