High School

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In a private open economy, a nation's net exports are equal to its exports minus its imports. In the private open economy, aggregate expenditures are equal to consumption plus investment.

a) minus, minus
b) minus, plus
c) plus, minus
d) plus, plus

Answer :

Final answer:

The answer is a) minus, minus. Net exports in a private open economy are calculated as exports minus imports, while aggregate expenditures are the sum of consumption plus investment plus net exports. The correct answer is 'b) minus, plus.'

Explanation:

The answer is a) minus, minus. The question pertains to concepts in macroeconomics, specifically the components that make up a nation's aggregate expenditures in a private open economy. When discussing net exports, they are calculated as exports minus imports. This adjustment is necessary because while some spending in an economy goes to domestic production, spending on imports does not contribute to domestic production and thus must be subtracted from the total expenditures.

On the other hand, exports represent the demand for domestically produced goods by other countries and are added to the total expenditure. Therefore, inside the national income identity, aggregate expenditures are equal to consumption plus investment plus net exports. Based on this explanation, the correct answer for the student's question is 'b) minus, plus.'

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