Question

In the aggregate expenditures model, it is assumed that: a.gross investment (I), government purchases (G), and net exports (NX) will all increase when real GDP (Y) increases. b.gross investment (I) and government purchases (G) are both independent of real GDP (Y), but net exports (NX) are not. c.gross investment (I), government purchases (G), and net exports (NX) are all independent of real GDP (Y). d.government purchases (G) are independent of real GDP (Y), but gross investment (I) and net exports (NX) are not.

Answer 1

Answer:

The Correct Option is "B"

Explanation:

Total consumption model was created accordingly of traditional model. It shows the connection between the GDP and arranged spending. The condition of consumption model is as per the following:  

Y = C + I + G + NX  

Where, Y is the genuine GDP, C is Consumption, I Refers to net investment, G is government buys and NX is net ex[port.  

The total use model accept that gross investment (I), government buys (G), and net export (NX) are independent to of genuine GDP (Y) as they don't depend on salary of the economy.