Explain why exports are added to, and imports are subtracted from, aggregate expenditures in moving from a private closed economy to a private open economy.
What will be an ideal response?
Exports must be added to aggregate expenditures because they represent sales of current output which would not have been counted elsewhere in summing up total expenditures. Imports must be subtracted from aggregate expenditures because they would be included in any summing of expenditures on final goods and services, but they do not represent goods or services produced here. Thus, to have an accurate estimate of domestic production, their value must be subtracted from the total expenditures.
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Having a comparative advantage means a nation can
A) benefit from trade. B) produce at a higher opportunity cost. C) produce more of the good. D) produce without incurring an opportunity cost. E) produce the good at a point beyond its PPF.
When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the
A) income effect. B) output effect. C) price effect. D) substitution effect.
If the price of gasoline increases from $2.50 per gallon to $3
00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week, the absolute value of price elasticity of demand in that price range is approximately A) 0.23. B) 4.35. C) 0.93. D) 2.34.
Changes in the rental price of land is largely determined by: a. changes in the supply of land
b. changes in the demand for land. c. changes in the elasticity of supply of land. d. the creation of new landfills.