Question

Let C stand for consumption spending, I for investment, G for government purchases, X for exports, IM for imports, DI for disposable income, and NT for net taxes.Consider the following identity and answer the questionsC + I + G + (X -IM) = DI + NTWhich of the following best characterizes the above identity?a. National Income must be equal to domestic product?b. Domestic product must exceed national income.c. Domestic product must equal the total amount of leakages from the nation's flow of income and expenditures.d. Domestic product must equal the total amount of injections into the nation's flow of income and expenditures.True or false: Imports must equal exports:a. Trueb. False

Answer 1

Answer:.a. National Income must be equal to domestic product, 2.  False

Explanation:

1.Gross Domestics product is the Value (in Monetary terms) of Goods and services produced within the Boarders of the country over a period of time, Gross domestic product is usually measured over a period of 12 months (a year). We calculate Gross Domestic Product by taking consumption , Add Investments , add government expenditure Add Exports and subtract Imports. Hence the equation GDP = C + I + G + (X - IM)

National Income is equal to Disposable Income plus Net Of Taxes. We Add Back Net Taxes because Taxes are subtracted from income in order to get Income available for consumption and/or saving

National Income = Total Disposable Income + Net of Taxes

National Income = DI + NT

C + I + G (G - IM) = DI + NT

The above identity simply means that The Gross domestic Product must equal to National Income. The correct statement that characterizes the above identity  .a. National Income must be equal to domestic product

2. True or False Question

False

Export doesnot need to be equal to the imports. Imports may be higher or lower than exports.