Question

Increases in import spending Select one: a. raise GDP. b. lower GDP. c. are always balanced off in GDP by changes in exports. d. may raise or lower GDP.

Answer 1

Answer:

B. Lower GDP

Explanation:

GDP (Gross Domestic product) represent the monetary value of all goods and services that produced in a country within a specific year.

GDP  is calculated with this formula : GDP = C + I + G + (X – M)

C : The amount of private consumption

I : Investment

G : Government spending

X : Export spending

M: Import spending

As you can see, M is the only one with (-) value . Which mean that if M is increased, the total amount of GDP will be decreased.