-Gross domestic product, GDP, is calculated using the following equation, where C is consumption, I is investment, G is government spending, EX is exports, and IM is imports (EX - IM is referred to as net exports): GDP = C + I + G + EX - IM Why is the value of imports subtracted from the sum of C, I, G, and EX in calculating GDP? A. GDP is a measure of a nation\'s standard of living. Because imports can lead to an increase in U.S. unemployment, they do not improve a nation\'s standard of living. B. GDP measures the value of output produced within a country. Some of the expenditures in C, I, and G derive from goods produced outside the United States. C. GDP is a measure of the federal government\'s budget situation. When imports exceed exports, the government is running a budget deficit. And suppose you put $5,000 in a bank account for one year. The money earns 6% interest and the inflation rate is 4%. Which of the following statements is true? I. You earn $200 in interest. II. Your purchasing power increases by $100. III. You have $5,300 in the bank at the end of the year. A. I only B. II only C. I and III only D. II and III only E. I, II, and III Solution B. GDP measures the value of output produced within a country. Some of the expenditures in C, I, and G derive from goods produced outside the United States. Imports are subtracted from the consumption expenditure of the domestic population. D. II and III only Interest earned = 6%*5000 = 300 Purchasing power increased by = (6%-4%)*5000 = 100 Amount in account = 5000*(1+0.06) = 5300.