In 2011, consumption spending is $7,000, government purchases of goods and services is $2,000, and investment spending is $1,500. If GDP for 2011 is $10,300, exports are _____ and imports are _____.
A) $400; $200
B) $100; $200
C) $600; $800
D) $500; $300

Question

Quizplus · Accepted Answer

GDP = C + I + G + (X - M)
$10,300 = $7,000 + $1,500 + $2,000 + (X - M)
$10,300 = $10,500 + (X - M)
(X - M) = -$200
Since X - M is negative, that means imports are greater than exports. To find the values of X and M, we need to solve for them using the given information:
C = $7,000 
I = $1,500 
G = $2,000 
X - M = -$200
X = M - $200
Substitute back into the GDP equation:
$10,300 = $7,000 + $1,500 + $2,000 + (M - $200 - M)
$10,300 = $10,500 - $200
$10,300 = $10,300
This confirms that our values for X and M are correct. To find the values of exports and imports, we simply subtract $200 from exports (X) and add $200 to imports (M):
X - $600 = -$200
X = $400
M + $800 = -$200
M = -$1,000
Since imports cannot be negative (you can't import a negative amount), we need to change the sign of the answer. Therefore, exports are $400 and imports are $1,000. This corresponds to choice C.

In 2011, Consumption Spending Is $7,000, Government Purchases of Goods