Question

2. When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle, a. U.S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declined by $1000. b. U.S. consumption does not change, U.S. net exports decline by $500, and U.S. GDP declined by $500. c. U.S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500. d. U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.

Answer 1

D

Step-by-step explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export

Net export = exports – imports

The purchase increases consumption spending on durable goods by $500. Also, because the good is imported, imports increase by $500. Import in a negative function of net export. Net export decrease by $500.

the increase in consumption cancels out the decreases in net export, so GDP remains the same