In an economy where GDP equals 100, consumption equals 67, investment equals 14, and government purchases equal 21,
A) exports must exceed imports by 2.
B) taxes must exceed government purchases by 2.
C) imports must exceed exports by 2.
D) net exports must equal 2.
E) none of the above.

Question

Quizplus · Accepted Answer

In this economy, GDP (Gross Domestic Product) is calculated as the sum of consumption, investment, government purchases, and net exports (exports minus imports). Given that GDP = 100, consumption = 67, investment = 14, and government purchases = 21, the sum of these three components is 102. Since the actual GDP is 100, this means that imports must exceed exports by 2 to balance the equation, making the net exports negative 2.

In an Economy Where GDP Equals 100, Consumption Equals 67