A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,
A) U.S. investment and GDP increase, but German GDP is unaffected.
B) U.S. investment and German GDP increase, but U.S. GDP is unaffected.
C) U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods.
D) U.S. investment, U.S. GDP, and German GDP all increase.

Question

Quizplus · Accepted Answer

The purchase of the tractor is an investment in the U.S., increasing U.S. GDP. However, since the tractor is produced in the U.S. (Iowa), it does not affect German GDP.

A Minnesota Farmer Buys a New Tractor Made in Iowa