Suppose you own a toy store in the United States, where there is high demand for the PlayNation Perfect, a video game console. Because of this, you spend $10,000 to increase your inventory of the gaming system, which is manufactured by Zony, a Japanese company, in Japan.
1. Determine the effects of this transaction on exports, imports, and net exports in the U. S. economy.

1. Determine the effects of this transaction on

a. Exports - There will be no effect on the export of the USA;

b. Imports - The initial amount spent on the importation of the toys and the videogame plus $10,000.00 spent on the importation  of PlayNation Perfect Video game console to increase the inventory will put the Japanese economy on a favourable BalanceBalance of Payment (BOP) because money came into the economy and left the USA economy simultaneously.

c. Net exports in the U.S. economy will be low.

Explanation:

a. Exports - There will be no effect on the export of the USA because the store did not export anything rather it imported the PlayNation Perfect video game console from a Japanese company and spent an additional $10,000.00 to increase his inventory. Simply put, money left the US economy without a complementary import to strike a balance in Balance of Payment.

b. Imports - The initial money spent in the importation of the consignment and  $10,000.00 spent to increase his inventory will put the Japanese economy on a favourable Balance of Payment (BOP) because money came into the economy and left the US economy;

c. Net exports in the U.S. economy will be low because there were importations of  goods into the economy without corresponding export to have a favourable Balance of Payment in the International Trade. It is when the Exports in USA is greater that that of the import that you have a favourable Balance of Paymet and  it  translates to improve GDP.

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