Gross domestic product, GDP, is calculated using the following equation, where C is consumption, I is investment, G is government spending, EX is exports, and IM is imports (EX - IM is referred to as net exports): GDP = C + I + G + EX - IM
Why is the value of imports subtracted from the sum of C, I, G, and EX in calculating GDP?
A. GDP is a measure of a nation's standard of living. Because imports can lead to an increase in U.S. unemployment, they do not improve a nation's standard of living.
B. GDP measures the value of output produced within a country. Some of the expenditures in C, I, and G derive from goods produced outside the United States.
C. GDP is a measure of the federal government's budget situation. When imports exceed exports, the government is running a budget deficit.
And suppose you put $5,000 in a bank account for one year. The money earns 6% interest and the inflation rate is 4%. Which of the following statements is true?
I. You earn $200 in interest.
II. Your purchasing power increases by $100.
III. You have $5,300 in the bank at the end of the year.
A. I only
B. II only
C. I and III only
D. II and III only
E. I, II, and III
Gross domestic product, GDP, is calculated using the following equation, where C is consumption, I is investment, G is government spending, EX is exports, and IM is imports (EX - IM is referred to as net exports): GDP = C + I + G + EX - IM
Why is the value of imports subtracted from the sum of C, I, G, and EX in calculating GDP?
A. GDP is a measure of a nation's standard of living. Because imports can lead to an increase in U.S. unemployment, they do not improve a nation's standard of living.
B. GDP measures the value of output produced within a country. Some of the expenditures in C, I, and G derive from goods produced outside the United States.
C. GDP is a measure of the federal government's budget situation. When imports exceed exports, the government is running a budget deficit.
And suppose you put $5,000 in a bank account for one year. The money earns 6% interest and the inflation rate is 4%. Which of the following statements is true?
I. You earn $200 in interest.
II. Your purchasing power increases by $100.
III. You have $5,300 in the bank at the end of the year.
A. I only
B. II only
C. I and III only
D. II and III only
E. I, II, and III
Related textbook solutions
Related questions
Categories of expenditures
Larry and Megan Smith live in Swarthmore, PA. Their son, Raphael, owns his own plumbing business.
For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (EX), or imports (IM). Check all that apply.
|
Transaction |
C |
I |
G |
EX |
IM |
|
|---|---|---|---|---|---|---|
| Megan gets a new video camera made in the United States. | Ā | Ā | Ā | Ā | Ā | Ā |
| Raphael buys a new set of tools to use in his plumbing business. | Ā | Ā | Ā | Ā | Ā | Ā |
| The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. | Ā | Ā | Ā | Ā | Ā | Ā |
| Larry buys a sweater made in Guatemala. | Ā | Ā | Ā | Ā | Ā | Ā |
| Larry's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China. | Ā | Ā | Ā | Ā | Ā | Ā |
