Final answer:
To adjust U.S. GDP for actual domestic production, spending on imports must be subtracted. The net export component is calculated as exports minus imports and determines the trade balance. The U.S. has had a trade deficit since the early 1980s.
Step-by-step explanation:
When calculating the Gross Domestic Product (GDP), we should subtract spending on imports since these are goods not produced domestically, in this case, not within the United States. The spending on imports by residents of the country, though factored into consumption, does not reflect domestic production and therefore must be removed from the GDP calculation. The GDP net export component is a key part of this calculation and is determined by the formula: GDP Net Exports = Exports (X) - Imports (M). A trade balance that shows imports exceeding exports indicates a trade deficit. Conversely, when exports exceed imports, the country has a trade surplus. Historically, the United States experienced a trade surplus during the 1960s and 1970s. Since the early 1980s, however, the U.S. has faced a trade deficit with imports regularly surpassing exports.