14 - Net Exports (NX) = Exports Imports - If an American...

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Net Exports (NX) = Exports – Imports - If an American buys an Italian farrari, Imports means that US GDP will go down 100K, but it will also go up 100K because someone had to consume that farrari. So the US GDP is unaffected. However, if you look at Italy’s GDP, its GDP only goes up 100K so the US loses relatively - Exports represent foreign spending on the economy’s g&s. - Imports are the portions of C , I , and G Income Approach - The rationale behind the income approach is that total expenditures on final goods and services are eventually received by households and firms in the form of wage, profits, rent, and interest income - Income approach formula is o GDP = wages (workers)n+ profits (businesses) + rents (lands) + interest (banks) Value added approach - the increase in the value of goods/services as a result of the production process that’s the definition of production! o Intermediate good is a good used for a final product - we want to calculate nominal GDP by additing together the value of production for all different industries in the economy, agriculture, mining, construction,
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14 - Net Exports (NX) = Exports Imports - If an American...

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