Economics Real Vs Nominal Gdp Questions
Net exports, which is the difference between a country's exports and imports, directly affects GDP. When net exports are positive, meaning exports exceed imports, it contributes to an increase in GDP. This is because exports represent domestic production that is sold to other countries, generating income and economic activity within the country. On the other hand, when net exports are negative, meaning imports exceed exports, it leads to a decrease in GDP. This is because imports represent goods and services produced in other countries, which reduces domestic production and economic activity. Therefore, net exports play a significant role in determining the overall level of GDP in an economy.