Why Does a Country's Net Exports Need to Be Part

question 64

Multiple Choice

Why does a country's net exports need to be part of the calculation of the country's GDP?

• A) Both imports and exports need to be subtracted because both are produced abroad even though purchased within the country.
• B) Both imports and exports need to be added into GDP because both are part of the country's output even though imports are sold abroad.
• C) Exports are part of the country's production that need to be counted. Imports are part of the country's purchases but need to be subtracted because they are not part of the country's output.
• D) Exports are not part of the country's production and need to be subtracted. Imports are part of the country's production and need to be included.

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Definitions:

Pareto Optimality

A state of allocation of resources from which it is impossible to reallocate to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.

Voluntary Exchange

An economic transaction in which two parties agree to trade goods or services based on mutual consent.

Autographed Picture

A photograph signed by a celebrity or well-known person, often sought after by fans and collectors as a valuable or sentimental item.

Potentially Efficient

A state where resources could be allocated in a way that no one could be made better off without making someone else worse off.