Question

The Commerce Department reported that in December​ 2015, retail sales rose by 0.2​ percent, net exports​ decreased, inventories held by businesses rose by 0.1​ percent, and total sales by businesses fell by 0.6 percent. ​Source: Commerce​ Department, February 2016 Explain the effect of the fall in net exports on GDP.

Answer 1

Answer:

GDP reduces.

Explanation:

Gross Domestic Product includes four components:

= Consumption spending + investment spending + Government spending + Net exports

It was given that business experiencing a rise in its inventory (0.1 percent) and reduction in the total sales (0.6 percent).

We know that net exports are added to the nation's GDP, so any change in the net exports will also affect the GDP. Therefore, if there is a fall in the net exports then as a result there is a reduction in the GDP.