After studying this topic, you should be able to understand
- In a four sector economy, the export and Import of goods and services affect the level of aggregate demand.
- There are two approaches to the determination of the equilibrium Income and output, the aggregate demand—aggregate approach and supply leakages equals injections approach.
- Transfer payments increase the equilibrium level of income.
- The four sector equilibrium exists where the C + I + G + X – M curve and aggregate supply curve intersect.
- A zero marginal propensity to import implies a multiplier, which has the same value as the ordinary multiplier.
- In an open economy, the ...