For each of the following transactions, state the effect both on U.S. GDP and on the four components

For each of the following transactions, state the effect both on U.S. GDP and on the four components of aggregate expenditure.

a. Your mother-in-law buys a new car from a U.S. producer.

U.S. GDP (Click to select)decreasesincreasesdoes not change.

Of the four components of aggregate expenditure:

  consumption rises and net exports fall.
  investment rises and net exports do not change.
  consumption rises and net exports do not change.
  investment rises and net exports fall.

b. Your mother-in-law buys a new car imported from Sweden.

U.S. GDP (Click to select)decreasesdoes not changeincreases.

Of the four components of aggregate expenditure:

  consumption rises and net exports do not change.
  net exports do not change and government purchases rise.
  investment rises and net exports do not change.
  consumption rises and net exports fall.

c. Your mother-in-law's car rental business buys a new car from a U.S. producer.

U.S. GDP (Click to select)decreasesdoes not changeincreases

Of the four components of aggregate expenditure:

  net exports do not change and government purchases rise.
  investment rises and net exports do not change.
  consumption rises and net exports fall.
  consumption rises and net exports do not change.

d. Your mother-in-law's car rental business buys a new car imported from Sweden.

U.S. GDP (Click to select)does not changeincreasesdecreases.

Of the four components of aggregate expenditure:

  consumption rises and net exports fall.
  investment rises and net exports fall.
  consumption falls and net exports remain the same.
  investment falls and net exports rise.

e. The U.S. government buys a new, domestically produced car for the use of your mother-in-law, who has been appointed the ambassador to Sweden.

U.S. GDP (Click to select)does not changeincreasesdecreases.

Of the four components of aggregate expenditure:

  consumption rises and net exports do not change.
  net exports do not change and government purchases rise.
  consumption rises and net exports fall.
  investment rises and net exports do not change.

 

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