Explain how the purchases of used goods and of financial assets affect GDP
What will be an ideal response?
Used goods count in GDP for the year in which they were produced. Hence the purchase of a used good is not included in GDP. Purchases of financial assets, such as stocks, are a transfer of funds and not the purchase of a newly produced good or service. When the firm uses the funds it acquires from selling the stocks or bonds to purchase capital, the purchase of the capital will count as investment, but the initial purchase (and sale) of the financial asset itself does not count in GDP.
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As China's auto production capability has evolved, it is unclear whether protection was beneficial or harmful. Why?
a. Accounting data must be translated from Chinese to English, and that is a difficult task. b. After 30 years of infant industry protection, the tariff on auto imports is still significant (a 25% tariff). c. China will probably never achieve exports, so whether any gains were made is unclear. d. Chinese consumers are exerting more market power, and they are opposed to any kind of import protection.
Other things remaining the same, as U.S. imports increase, the quantity of
A) foreign currency supplied increases. B) U.S. dollars supplied decreases. C) foreign currency demanded increases. D) foreign currency demanded decreases. E) U.S. dollars demanded increases.