Which of the following best describes the relationship between imports and exports? Import spending is ___________...

Which of the following best describes the relationship between imports and exports? Import spending is ___________ GDP and export spending is __________ GDP.

A) subtracted from; subtracted from

B) added to; subtracted from

C) subtracted from; added to

D) added to; added to

Solutions

Expert Solution

Option-(C)subtracted from;added to

is the correct answer.

Import spending subtracted from GDP and export spending is added. to GDP.

GDP is the market value of all the final goods and services produced within the domestic territory of a country during an accounting or financial year.

Imports are the goods and services purchased and brought into the domestic territory from a foreign country.They are produced outside the domestic territory of a country and payment is made in lieu of getting that good.

They are subtracted from GDP because they are already included in GDP as a part of consumption expenditure,government expenditure and investment and if not subtracted may be overstated or double counted.

Exports are the goods and services produced wiithin the domestic boundary of a country and are sold to the foreign country.It means goods are sent outside.

It is added because they are not included as a part of consumption ,government or investment expenditure.Exports are a part of our domestic production and so they must be added to GDP in order to get the correct figure.

Rahul Sunny answered 1 year ago

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