When an American college student in Davis,California spends $200 on a pair of Louis Vuitton jeans (a famous French brand),U.S.consumption ________,U.S.net exports ________,and U.S.GDP ________.
A)does not change;increases by $200;increases by $200
B)increases by $200;decreases by $200;does not change
C)increases by $200;does not change;increases by $200
D)does not change;does not change;does not change
E)does not change;decreases by $200;decreases by $200

Question

Quizplus · Accepted Answer

When the student buys the jeans, U.S. consumption increases by $200. Since the jeans are imported, U.S. net exports decrease by $200. The increase in consumption is offset by the decrease in net exports, so U.S. GDP does not change.

When an American College Student in Davis,California Spends $200 on a Pair