Question

GDP = C +1 +16 +(X-M). In this model, the "(X-M)" represents the

A. total of the dollar value of goods sent abroad and goods purchased from abroad.
B. difference between the dollar value of goods sent abroad and goods purchased from
abroad
C. total investments in the United States by foreign nationals.
D. total investments in other nations by United States citizens.

Answer 1

The term (X - M) in the GDP equation represents the difference between the dollar value of exports and imports, known as the net export component.

Step-by-step explanation:

In the GDP equation GDP = C + I + G + (X - M), the term (X - M) represents the difference between the dollar value of goods sent abroad and goods purchased from abroad. This component is known as the net export component of GDP, which can indicate either a trade surplus if exports (X) exceed imports (M), or a trade deficit if imports exceed exports. It is crucial to consider both exports and imports for an accurate assessment of a country's economic performance within a global context.