A very small country\'s gross domestic product is $12 million. a) If government

Question

A very small country's gross domestic product is $12 million.

a) If government expenditures amount to $7.5 million and gross private domestic investment is $5.5 million, what would be the amount of net exports of goods and services?

Part 2 of above:

How would your answer change if the gross domestic product had been $14 million?

Problem #1 - Start by looking at the equations for Gross Domestic Product. The equation is GDP=PCE + GE+GPDI+NE. Please take a few minutes to read what each component stands for.

Manipulate the equation to solve for the Net Exports.

Use the following equation NE = GDP - PCE - GPDI - GE

Begin to substitute the known values in to the equation. You will note that the problem does not provide any data for the Personal Consumption Expenditure. So, assume that it is zero for this problem.

PART 2 is very similar. Except this time you will need to use a different value for the GDP. Please use the same formula to solve for NE

Use the following equation NE = GDP - PCE - GPDI - GE

Explanation / Answer

ANSWER

7.5 + 5.5 is $13
Since GDP= investment + govt spending + consumer spending(not mentioned here) + net exports, net exports must be -$1million to drop GDP down to $12 million. This means there is $1 million more imported than exported

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