ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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money
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consumer spending
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exports
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imports
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Detailed explanation-1: -Explain that for the GDP expenditure equation, economists group exports (X) and imports (M) together within parentheses, which indicates the balance of trade. That is, the value of imports is subtracted from the value of exports. A negative trade balance (or trade deficit) occurs when imports exceed exports (M > X).
Detailed explanation-2: -This is often written as C + I + G + (X-M), where C is personal consumption expenditures, I is investment, G is government purchases of goods and services, X is exports, and M is imports. Together, this is all of Gross Domestic Product, or GDP.
Detailed explanation-3: -The formula for GDP is: GDP = C + I + G + (Ex-Im), where “C” equals spending by consumers, “I” equals investment by businesses, “G” equals government spending and “(Ex-Im)” equals net exports, that is, the value of exports minus imports.
Detailed explanation-4: -In economic models involving international trade, X is usually chosen to represent exports, and M to represent imports, perhaps because E and I have too many other uses.