In a mixed open economy, where aggregate expenditures exceed GDP: A)I_g + X + G = C_a. B)C_a + I_g + X_n + G S. D)I_g + X + G S_a + M + T.

Question

In a mixed open economy, where aggregate expenditures exceed GDP: A)I_g + X + G = C_a. B)C_a + I_g + X_n + G < domestic output. C)I_g > S. D)I_g + X + G > S_a + M + T.

Quizplus · Accepted Answer

In a mixed open economy, the equation for equilibrium GDP is IS = S + M + T, where IS represents aggregate expenditures, S represents domestic saving, M represents imports, and T represents taxes. Therefore, if aggregate expenditures (IS) exceed GDP, then IS + X + G > SS + M + T, which is represented in choice D.

In a Mixed Open Economy, Where Aggregate Expenditures Exceed GDP