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23 November, 20:05

The goods market of an open economy is in equilibrium when domestic output or production is:

A. equal to the demand for domestic goods.

B. equal to the foreign demand.

C. equal to the domestic demand.

D. equal to net exports.

The equilibrium level of output ▼ must be could be can not be the same as the level of output at which trade is balanced.

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  1. 23 November, 22:51
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    Answer: The correct answer is "A. equal to the demand for domestic goods.".

    Explanation: In the market for goods and services, the equilibrium will take place when production or income is equal to aggregate demand.

    We know that aggregate demand is equal to Consumption + Investment + Government spending + Net exports.

    Therefore the goods market will be in balance when domestic production is equal to the TOTAL demand for domestic goods.
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