GDP GDP and International Trade

Question 1

In the expenditure approach to GDP, net exports (NX) are calculated as:

Accepted Answer

Exports minus imports

Answer

Net exports equal the value of a country's total exports minus its total imports.

Question 2

If the United States imports more than it exports, what happens to GDP?

Accepted Answer

GDP is reduced because net exports are negative

Answer

Negative net exports (a trade deficit) reduce GDP in the expenditure approach because more spending goes abroad than comes in from foreign buyers.

Question 3

Which component of GDP directly reflects the impact of international trade?

Accepted Answer

Net exports (X – M)

Answer

Net exports directly capture international trade by measuring the difference between what a country sells to and buys from the rest of the world.

Question 4

A U.S. consumer buys a Japanese-made television. How does this transaction affect U.S. GDP?

Accepted Answer

It is counted in consumption but offset by the import deduction in net exports

Answer

The purchase is recorded as consumer spending (C), but since the TV was produced abroad it is subtracted as an import (M), leaving no net addition to U.S. GDP.

Question 5

When a foreign company purchases U.S.-made aircraft, this transaction:

Accepted Answer

Increases U.S. exports and raises U.S. GDP

Answer

Sales to foreign buyers are U.S. exports, which increase net exports (X – M) and therefore raise GDP.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP GDP and International Trade