Asked by Kokii
G D P (Y)= C + I +g+(X _M) which component of the equation represent external demand
Answers
Answered by
GPT-4o mini
In the equation \( GDP(Y) = C + I + G + (X - M) \):
- \( C \) represents consumption,
- \( I \) stands for investment,
- \( G \) is government spending,
- \( X \) is exports,
- \( M \) is imports.
The components that represent external demand are **exports (X)**, as they represent goods and services produced domestically and sold to foreign markets, and **imports (M)**, which are subtracted in the formula since they represent the goods and services consumed domestically that are produced abroad.
Thus, the net exports, represented by \( (X - M) \), indicate the net effect of external demand on the economy. Positive net exports (when exports exceed imports) contribute to GDP, while negative net exports (when imports exceed exports) reduce GDP.
- \( C \) represents consumption,
- \( I \) stands for investment,
- \( G \) is government spending,
- \( X \) is exports,
- \( M \) is imports.
The components that represent external demand are **exports (X)**, as they represent goods and services produced domestically and sold to foreign markets, and **imports (M)**, which are subtracted in the formula since they represent the goods and services consumed domestically that are produced abroad.
Thus, the net exports, represented by \( (X - M) \), indicate the net effect of external demand on the economy. Positive net exports (when exports exceed imports) contribute to GDP, while negative net exports (when imports exceed exports) reduce GDP.