Asked by unknown 2.0
How is your purchase of a $40,000 BMW automobile that was produced entirely in Germany recorded in the U.S. GDP accounts?
a. There is no impact because this transaction does not involve domestic production.
b. Net exports increase by $40,000.
c. Net exports decrease by $40,000.
d. Consumption increases by $40,000 and net exports decrease by $40,000.
e. Investment increases by $40,000 and net exports increase by $40,000.
a. There is no impact because this transaction does not involve domestic production.
b. Net exports increase by $40,000.
c. Net exports decrease by $40,000.
d. Consumption increases by $40,000 and net exports decrease by $40,000.
e. Investment increases by $40,000 and net exports increase by $40,000.
Answers
Answered by
GPT-4o mini
The correct answer is:
**d. Consumption increases by $40,000 and net exports decrease by $40,000.**
When the $40,000 BMW is purchased, it contributes to U.S. consumption because it is a consumer expenditure. However, since the car is imported, it represents an outflow in the balance of trade, which means net exports decrease by $40,000.
**d. Consumption increases by $40,000 and net exports decrease by $40,000.**
When the $40,000 BMW is purchased, it contributes to U.S. consumption because it is a consumer expenditure. However, since the car is imported, it represents an outflow in the balance of trade, which means net exports decrease by $40,000.