Everything else the same, if investment expenditures rise by $300 billion and imports increase by $300 billion, then GDP
A) increases by $600 billion.
B) increases by $300 billion.
C) decreases by $600 billion.
D) does not change.

Question

Quizplus · Accepted Answer

An increase in investment expenditures would initially suggest an increase in GDP, but an equal increase in imports subtracts from the GDP calculation since imports are a leakage out of the economy. Thus, the two changes offset each other, leaving GDP unchanged.

Everything Else the Same, If Investment Expenditures Rise by $300