The identity that shows that total income and total expenditure are equal is
A)GDP = Y.
B)Y = DI + T + NX.
C)GDP = GNP - NX.
D)Y = C + I + G + NX.

Question

Quizplus · Accepted Answer

The identity that shows that total income and total expenditure are equal is the circular flow identity, which is expressed as Y = C + I + G + NX. This equation shows that the total income (Y) generated by an economy is equal to the total expenditure on consumption (C), investment (I), government spending (G), and net exports (NX). This identity holds true for all economies, whether they are closed or open. Therefore, the correct answer is D, Y = C + I + G + NX.

The Identity That Shows That Total Income and Total Expenditure