Question : In an open economy, aggregate demand is estimated as:
Option 1: Private consumption expenditure
Option 2: Private consumption expenditure + Government expenditure
Option 3: Private investment expenditure + Private consumption expenditure + Government expenditure
Option 4: Private consumption expenditure + Private investment expenditure + Government expenditure + Net exports
Correct Answer: Private consumption expenditure + Private investment expenditure + Government expenditure + Net exports
Solution : The correct answer is (d) Private consumption expenditure + Private investment expenditure + Government expenditure + Net exports
Net exports, which represent the difference between exports and imports, are indeed an important component of aggregate demand in an open economy. Thank you for pointing out the error, and I apologize for any confusion caused.
