Question

In the model GDP = C + I + G + F, what does the "F" represent?

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

Answer 1

The "F" in the model GDP = C + I + G + F stands for net exports, which is the difference between a country's exports and imports, also known as the trade balance.

Step-by-step explanation:

In the model GDP = C + I + G + F, the "F" represents the net exports component of a country's Gross Domestic Product (GDP). More precisely, F stands for the dollar value of exports (X) minus the dollar value of imports (M), which is expressed as (X - M). This difference is known as the trade balance. If a country exports more than it imports, it has a trade surplus; if it imports more than it exports, there is a trade deficit. For example, in the United States during the 1960s and 1970s, exports typically exceeded imports, signalling a trade surplus. However, since the early 1980s, the situation has reversed, with imports surpassing exports, indicating a trade deficit.