Y = C + I + G + NX is an identity because
A)each symbol identifies a macroeconomic variable.
B)the right-hand and left-hand sides are equal when an equilibrium is reached.
C)the equality holds due to the way the variables are defined.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The equation Y = C + I + G + NX is an identity because it is true by definition; the variables are defined in such a way that their sum always equals the total output (Y) in an economy.

Y = C + I + G + NX Is