Chapter 13, Problem 10AA

To determine

To ascertain: The components of GDP a part from net exports and government goods and services.

Explanation of Solution

Four main factors of GDP are: 1. Expenditure on private Use (C) 2. Investment outlay (I) 3. Governing Goods and Services Transactions (G) 4. Net export (X-M).

Expenditure on private use: This portion calculates the money value of consumer goods and services which households and non-profit organizations purchase for current use during an account period.

Investment: Involves construction of housing facilities, constructing factories and offices, and contributing to a company's inventories of products.

Government spending: This part summarizes the Government's goods and services expenditure. It requires I purchasing intermediate goods, and (ii) paying government wages and salaries. All purchases made by governments are a fall measurement for government production.

Net export (X-M): This indicates the disparity between international spending on foreign goods ( i.e., imports) and investing on goods coming from outside. Therefore the difference between a country's exporting and importing of goods is called Net Exports (X-M).

Economics Concept Introduction

Introduction: GDP is the value of production that is ready to use in a domestic territory geographic boundaries over a defined period of time, mainly for one year. The growth rate in GDP is a significant indicator of economic performance for a country.