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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 in 1994 the total output in a single-good economy was

7,000 buckets of chicken. Also suppose that in 1994 each bucket of chicken was

priced at \(10. Finally, assume that in 2015 the price per bucket of chicken was

\)16 and that 22,000 buckets were produced. Determine the GDP price index for

1994, using 2015 as the base year. By what percentage did the price level, as

measured by this index, rise between 1994 and 2015? What were the amounts of

real GDP in 1994 and 2015?

Suppose GDP is $15 t r i l l i o n, w i t h$ 8 trillion coming from consumption, $2.5 t r i l l i o n c o m i n g f r o m g r o s s i n v e s t m e n t,$ 3.5 trillion coming from government expenditures, and $1 t r i l l i o n c o m i n g f r o m n e t e x p o r t s . A l s o s u p p o s e t h a t a c r o s s t h e w h o l e e c o n o m y, p e r s o n a l i n c o m e i s$ 12 trillion. If the government collects \(1.5 trillion in personal taxes, then disposable income is:

a. \)13.5 trillion

b. \(12.0 trillion

c. \)10.5 trillion

d. none of the above

Why do national income accountants compare the market value of the total outputs in various years rather than actual physical volumes of production? What problem is posed by any comparison over time of the market values of various total outputs? How is this problem resolved?

Suppose that California imposes a sales tax of 10 percent on all goods and services. A Californian named Ralph then goes into a home improvement store in the state capital of Sacramento and buys a leaf blower that is priced at $200. W i t h t h e 10 p e r c e n t s a l e s t a x, h i s t o t a l c o m e s t o$ 220. How much of the \(220 paid by Ralph is in the national income and product accounts as private income (employee compensation, rents, interest, proprietor’s income, and corporate profits)?

a. \)220

b. \(200

c. \)180

d. none of the above

In what ways are national income statistics useful?

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