Which of the following pairs is correctly matched?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Source of demand for domestic goods that comes from abroad – exports
In an open economy, exports are the demand for our goods that comes from abroad. Imports are the part of our own demand that goes to foreign goods.
Option (1) Sources of demand for domestic goods in a closed economy – consumption, investment and exports — Incorrect. A closed economy has no exports; its three sources are consumption, investment and government spending.
Option (2) Net exports – imports minus exports — Incorrect. Net exports are exports minus imports.
Option (3) Source of demand for domestic goods that comes from abroad – exports — Correct. Exports are an additional source of demand from abroad.
Option (4) Part of domestic demand that falls on foreign goods – exports — Incorrect. That part of demand is imports.
NCERT (2026-27): “National Income Identity for an Open Economy In a closed economy, there are three sources of demand for domestic goods – Consumption (C ), government spending (G ), and domestic investment (I ). We can write Y = C + I + G (6.1) In an open economy, exports (X ) constitute an additional source of demand for domestic goods and services that comes from abroad and therefore must be added to aggregate demand. Imports (M ) supplement supplies in domestic markets and constitute that part of domestic demand that falls on foreign goods and services. …” “… where, NX is net exports (exports – imports). …” |