Consider the following exchange:

I don’t know why people refuse to acknowledge this point

“Our deficit hurts our economy”

“No it doesn’t”

“What’s the formula for GDP”

“GDP =C + I + G + (X – M)”

“Lowering M increases GDP. It’s math”

1- How would you respond to the exchange above as an economist? Be specific and clear when crafting your response. Explain your answer as if you were teaching a friend that has never learned about GDP.

2- How would you change the accounting identify so that it makes more sense to people? Explain your change.