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Chapter 7: Q10. (page 151)

Define net exports. How are net exports determined? Explain why net exports might be a negative amount.

Short Answer

Expert verified

Net exports refer to the total value of a nation’s international trade.

Net exports are determined by calculating the difference between the value of exports and imports.

Net exports will be negative when the imports are higher than the exports.

Step by step solution

01

Net exports

Net exports include the sum total of a nation's international trade, which is one of the crucial factors in the GDP calculation of a nation. They are also called trade balance, and these figures might be positive or negative. The net exports are determined by subtracting the value of a nation's imports from the value of exports.

The net exports can either be positive or negative in nature. If the exports are lower than the imports of a nation, the trade balance will be a negative figure, and if the exports are higher than imports, it will be positive. The negative export shows the trade deficit of a nation.

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Most popular questions from this chapter

Suppose that this year a small country has a GDP of \(100 billion. Also assume that Ig = \)30 billion, C = \(60 billion, and Xn = − \)10 billion. What is the value of G?

a. \(0

b. \)10 billion

c. \(20 billion

d. \)30 billion

What is the difference between gross private domestic investment and net private domestic investment? If you were to determine net domestic product (NDP) through the expenditures approach, which of these two measures of investment spending would be appropriate? Explain.

Which of the following items are included in official U.S. GDP statistics? Select one or more answers from the choices shown.

a. Revenue generated by illegal marijuana growers.

b. money spent to clean up a toxic waste site in Ohio.

c. Revenue generated by legal medical marijuana sales in California.

d. The dollar value of the annoyance felt by local citizens living near a noisy airport in Georgia.

e. Andre paying Ted for a haircut in Chicago.

f. Emily and Aliya trading an hour of dance lessons for a haircut in Dallas.

Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and income approaches. The results you obtain with the different methods should be the same.

  1. Using the above data, determine GDP by both the expenditures approach and the income approach. Then determine NDP.

  2. Now determine NI in two ways: first, by making the required additions or subtractions from NDP; and second, by adding up the types of income and taxes that makeup NI.

  3. Adjust NI (from part b) as required to obtain PI.

  4. Adjust PI (from part c) as required to obtain DI.

A small economy starts the year with \(1 million in capital. During the course of the year, gross investment is \)150,000 and depreciation is \(50,000. What is the economy’s capital stock at the end of the year?

a. \)1,150,000

b. \(1,100,000

c. \)1,000,000

d. \(850,000

e. \)800,000
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