Calculating a Missing Component's Contribution to GDP Growth
An economy's total output is projected to grow by 2.5% next year. Economic analysts have provided the following forecasts for three of the four main expenditure components:
- Consumption, which makes up 60% of the economy, is expected to grow by 2.0%.
- Investment, which makes up 25% of the economy, is expected to grow by 4.0%.
- Government Spending, which makes up 20% of the economy, is expected to grow by 1.5%.
- Net Exports make up the remaining -5% of the economy (representing a trade deficit).
To meet the overall 2.5% growth target, what growth rate is required for Net Exports? Show your calculation steps.
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Which of the following statements provides the most accurate critique of the advisor's conclusion?