Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 10 - Measuring a Nation's Income - Quick Check Multiple Choice - Page 215: 4

Answer

c. Net exports fall, while GDP is unchanged

Work Step by Step

When an American buys a pair of shoes, the net exports get reduced by the value of those pair of shoes as it is subtracted from the value of exports. However, the GDP remains unchanged as the value of the pair of shoes is added to the GDP under Consumption. Hence the addition of the value of shoes in the consumption and subtraction in the net export renders the GDP unchanged
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