In which of the following situations for a mixed open economy will the level of GDP expand? A)when I_g + X + G exceeds S_a + M + T B)when S_a + T + M exceeds I_g + G + X C)when domestic output exceeds C_a + I_g + G + X_n D)when I_g + M + T exceeds C_a + X + S

Question

Quizplus · Accepted Answer

In a mixed open economy, GDP is determined by the total spending in the economy, which is determined by the equation: GDP = C + I + G + (X - M) where C is consumption, I is investment, G is government spending, X is exports, and M is imports. Option A indicates that total spending in the economy (I_g + X + G) exceeds the total income earned in the economy (S_a + M + T). This means that the economy is producing more goods and services than it is currently consuming and importing, leading to an increase in GDP.

In Which of the Following Situations for a Mixed Open