When calculating GDP in an open economy, we adjust GNE by:

Question

Quizplus · Accepted Answer

When calculating GDP in an open economy, we adjust GNE (Gross National Expenditure) by subtracting imports and adding exports. This is because GNE includes all expenditures on goods and services produced by residents, but imports are produced by foreign residents and therefore do not contribute to domestic GDP. On the other hand, exports are produced by domestic residents and contribute to GDP, but are not part of GNE. So we subtract imports (which are part of GNE but not GDP) and add exports (which are part of GDP but not GNE) to get the total GDP.

When Calculating GDP in an Open Economy, We Adjust GNE