Economy Shrinks 1.4% in First 3 Months of Year, Raising Recession Fear

EconEye Admin

4 years ago

Among the factors dragging down the economy at the beginning of 2022 were a fall in retailers’ inventory purchases and a growing trade gap. Consumer spending remained solid.—washingtonpost.com

Answer the following questions to check your understanding of the story.

What approach is the news clip using to measure GDP? What category is not mentioned?

The news clip is using the ______________. The category not mentioned is ______________.

a) expenditure approach; government expenditure

b) expenditure approach; investment

c) income approach; rental income

d) expenditure approach; depreciation

What are the categories in the expenditure approach to calculating GDP? What are the categories in the income approach to calculating GDP?

The news clip is using the expenditure approach. Retailers’ inventory purchases are investment, The growing trade gap is exports and imports, and consumer spending is consumption expenditure. The category not mentioned is government expenditure.

In what situation would changes in imports and exports make net exports more negative?

a) Imports increase by less than exports increase

b) Imports decrease by more than exports decrease

c) Exports increase and imports decrease

d) Imports increase by more than exports increase

Net exports are calculated as exports minus imports. Suppose exports are $20 billion and imports are $30 billion. What is net exports? How can you change the values of exports and imports to make net exports more negative?

When imports increase by more than exports increase, net exports become more negative.

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