The following equations relate to an open economy with a government sector. E = aggregate expenditure on domestically produced goods, C = Consumption, I = Investment, G = Government expenditure, T = taxes, M = imports, X = Exports. Which equation is correct
A. E = C + I + G B. E = C + I + G + M – X C. E = C + I + G + X – M D. E = C + I + G – T + M – X
Correct Answer: C
Explanation
The national income of a country can be estimated as aggregate expenditure, consumption, investment, government expenditure, export less import. Import will be deducted because it is the money paid on importation of goods from other countries.
