Question

The city of Cincinnati purchases a new, German-made bus for $150,000. 1. How is the GDP of the countries mentioned affected? The GDP of the U.S. [Select] The GDP of Germany goes up by $150,000. 2. In which component of each country's GDP (C, 1, G, or NX) will the transaction appear? C(U.S.): [Select] 1(U.S.): [Select] G (U.S.): [Select] NX (U.S.): [Select) C (Germany): [Select] (Germany): [Select ] G(Germany): (Select] NX (Germany): [Select)

Answer 1

1) When a german bus is purchased by the city of Cincinnati, the GDP of USA will go down by $150,000. As the bus is imported from Germany, and the imports act as a negative value while calculating the overall GDP, the GDP of the U.S. goes down by $150,000.

2) For both the countries, the component of NX(Net exports) will have the event of buying the German bus. The net exports(NX) will increase by $150,000 for Germany and the net exports(NX) component will decrease by $150,000 for USA.

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