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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鈥檚 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

Assume that a grower of flower bulbs sells its annual output of bulbs to an Internet retailer for \(70,000. The retailer, in turn, brings in \)160,000 from selling the bulbs directly to final customers. What amount would these two transactions add to personal consumption expenditures and thus to GDP during the year?

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

a. \(0

b. \)10 billion

c. \(20 billion

d. \)30 billion

Suppose that annual output in year 1 in a three-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. If the prices in both years are \(4 per quart for ice cream, \)3 per bottle of shampoo, and $2 per jar of peanut butter, what was the economy鈥檚 GDP in year 1? What was its GDP in year 2?

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.

Provide three examples of each: consumer durable goods, consumer non-durable goods, and services.
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