Since it is counted as investment, why doesn't the purchase of earthmoving equipment from China by a U.S. corporation increase U.S. GDP?
The purchase of foreign equipment is counted as investment, but GDP measures only the value of production within the geographic borders of the United States. In order to avoid including the value of the imported equipment, imports are subtracted from GDP. Hence, the value of the equipment in investment is canceled by subtracting its value as an import.
You might also like to view...
Money functions as a(n)
A) medium of exchange. B) unit of account. C) store of value. D) all of the above.
Which of these situations is most likely to cause the Fed to introduce a tight money supply?
(A) A recession has reduced aggregate demand and increased unemployment. (B) The economy is expanding quickly and inflation is a concern. (C) The economy is prosperous with relatively low inflation and low unemployment. (D) The federal government passes a new budget with a large deficit.