Question

24. An American soldier stationed in North Carolina receives a paycheck from the federal government for $300, which she uses to purchase a $100 MP3 player made in China by a Chinese firm and $200 for fruit and vegetables from a local farmers market. As a result, U.S. GDP increases by

Answer 1

Answer:

$200

Explanation:

GDP refers to the total value of all goods and services produced in a country in a period. Economists consider all products regardless of who manufactured them. Only finished consumer goods and services are counted to avoid double counting.

In the scenario, only the fruits and vegetables will add to the US GDP. They are finished consumer goods produced within the borders of the US. If they were capital goods, they would not be included in GDP calculations. The $100 spent on MP3 will not count because the item was not produced in the US. It is an import. Its value will be adjusted against exports when calculating GDP.