Question

For the economy that engages in international trade, GDP is divided into four components. Which of the following items is not one of those components?

a) Consumption
b) Investment
c) Government spending
d) Trade balance

Answer 1

The components of GDP in an economy that engages in international trade include consumption, investment, government spending, and net exports. Trade balance is not a separate component but is synonymous with net exports, making 'd) Trade balance' the correct answer to the question.

Step-by-step explanation:

For an economy engaging in international trade, the Gross Domestic Product (GDP) is typically broken down into four main components. These are: consumption (demand from consumers), investment (business spending), government spending on goods and services, and the net exports (which include both imports and exports). When analyzing these components, we see that consumption usually accounts for about two-thirds of the GDP.

Investment fluctuates but is around 15% of GDP, and government spending is slightly under 20% and has seen a mild decline over time. Net exports are calculated by subtracting imports from exports, which can result in a trade surplus if exports are higher or a trade deficit if imports exceed exports.

The item mentioned in the question that does not belong to the components of GDP is trade balance. Trade balance is synonymous with net exports and not a separate component. Therefore, the correct answer to the question is (d) Trade balance.