Question

Suppose Kim purchases a new personal computer produced in China for $ 2,800. What is the effect on the components of GDP and GDP as a whole

Answer 1

Answer and Explanation:

The effects are as follows:

Consumption would rise by 2,800

In the investment there is no change i.e. zero

In the government expenditure also, there is no change i.e. zero

Net exports would be reduced by $2,800 i.e. (exports - imports) so here the export is $0 and the import is $2,800

So the change in GDP would be zero as

= Increase in consumption - decrease in net exports

= $2,800 - $2,800

= $0