Why the decrease in exports contributed to the fall in real GDP? And what other components of GDP might have affected? And why?

Asked by: elizabethevania
  • Exports are a component of GDP

    GDP is the total value of output produced by a country in a given time (usually on a yearly or quarterly basis). GDP is calculated by adding up the value of consumer spending (C), business investment (I), government spending (G), exports (X) and deducting the value of imports (M). In short, GDP = C + I + G + X - M. Therefore, assuming other components of GDP remain the same, a decrease in exports (X) will reduce GDP.

    Other components of GDP can be affected by a fall in exports as well. For example, if exports in the UK are falling, it can be because fewer French people are buying products from the UK. So if businesses in the UK are selling less to France, UK businesses might not spend as much money buying extra machinery or hiring more employees because they are not getting enough revenue to make enough profit. Business investment (I) is money businesses are spending, so if businesses are spending less, the value of business investment (I) will fall as well because of exports falling.

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