Question

An increase in which of the following causes GDP to decrease?

A. exports

B. imports

C. Investment

D. None of the above

Answer 1

B

Explanation:

The GDP measures the market value of all goods and services produced in an economy (country or region) in a specific period of time. The GDP formula is:

GDP= Consumption (C)+ Investment (I)+ Government expenditure (G)+ (Exports - Imports) (Net exports)

Notice that if exports increase, GDP will increase too. Also, if investment increases GDP will increase. Notice that imports have a negative sign, then if they increase, GDP will decrease.