Question

Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then: Select one: a. exports exceed imports by $50 billion. b. imports exceed exports by $50 billion. c. imports exceed exports by $150 billion. d. exports exceed imports by $150 billion.

Answer 1

Answer:

a. exports exceed imports by $50 billion

Explanation:

The formula to calculate GDP of a country is,

GDP = Consumption (C) + Investment (I) + Govt. spending (G) + (Exports (X) - Imports (M))

Thus, we already know the three components and the figure of total GDP. To find out net exports, we simply equate both figures.

1.2 trillion = 1200 billion

1200 = 690 + 200 + 260 +Net exports (X-M)

1200 = 1150 + Net exports

Net exports = $50 bn

A net exports of positive $50bn means that exports exceed imports by $50bn and answer a is correct.