Which equation is correct?
A) AE = C + I + G + (X + M)
B) AE = C + I + G + (X - M)
C) AE = C + I - G + (X - M)
D) AE = C - I + G - (X + M)

Question

Quizplus · Accepted Answer

The correct equation for Aggregate Expenditure (AE) includes consumption (C), investment (I), government spending (G), and net exports (X - M), where X represents exports and M represents imports. This is because AE represents the total spending in an economy, which is comprised of these four components. Option B is the only equation that correctly includes the subtraction of imports from exports, reflecting the net effect of international trade on the economy's spending.

Which Equation Is Correct