The Commerce Department reported that in December 2015, retail sales rose by 0.2 percent, net exports decreased, inventories held by businesses rose by 0.1 percent, and total sales by businesses fell by 0.6 percent. Source: Commerce Department, February 2016 Explain the effect of the fall in net exports on GDP.

Question

Erica Dillon

Business

1 November, 17:43

The Commerce Department reported that in December 2015, retail sales rose by 0.2 percent, net exports decreased, inventories held by businesses rose by 0.1 percent, and total sales by businesses fell by 0.6 percent. Source: Commerce Department, February 2016 Explain the effect of the fall in net exports on GDP.

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Roland Butler · Answer 1

GDP reduces.

Explanation:

Gross Domestic Product includes four components:

= Consumption spending + investment spending + Government spending + Net exports

It was given that business experiencing a rise in its inventory (0.1 percent) and reduction in the total sales (0.6 percent).

We know that net exports are added to the nation's GDP, so any change in the net exports will also affect the GDP. Therefore, if there is a fall in the net exports then as a result there is a reduction in the GDP.