GDP equals $1.1 trillion.If consumption equals $690 billion,investment equals $200 billion,and government spending equals $270 billion,what can we conclude about the value of exports and imports for the country?
A)Net exports equal zero.
B)Exports exceed imports by $140 billion.
C)Exports exceed imports by $40 billion.
D)Imports exceed exports by $40 billion.

Question

Quizplus · Accepted Answer

According to the equation for calculating GDP, GDP = C + I + G + NX, where NX represents net exports (exports minus imports). Rearranging the equation, we get NX = GDP - C - I - G. Plugging in the given values, we get NX = $1.1 trillion - $690 billion - $200 billion - $270 billion = -$60 billion. This negative value means that imports exceed exports, so the correct answer is D, "Imports exceed exports by $40 billion" (note that the answer options provided a typo for the amount, as it should be $60 billion, not $40 billion).

GDP Equals $1