In an open macro model with no government, we will see all of the following equilibrium conditions except one, which is:
A) Y=C+I+X-Z.
B) S+Z=I+X.
C) I-S=Z-X.
D) I+S=Z+X.

Question

Quizplus · Accepted Answer

The correct equilibrium conditions in an open macro model with no government are: Y=C+I+X-Z (where Y is income, C is consumption, I is investment, X is exports, and Z is imports), which shows the components of GDP in an open economy; S+Z=I+X, which represents the savings and imports equaling investment and exports; and I-S=Z-X, which rearranges the previous equation to show the relationship between investment, savings, and the trade balance. The incorrect condition is I+S=Z+X, as it does not correctly represent any equilibrium condition in such an economic model.

In an Open Macro Model with No Government, We Will