Suppose that business firms spend $500 million on new capital equipment this year.Of this $500 million,$300 million was spent on domestically produced capital and $200 million was spent on foreign-produced capital.All else equal,these transactions contribute ________ to GDP.

Question

Quizplus · Accepted Answer

GDP only includes domestically produced goods and services, so the $200 million spent on foreign-produced capital is not included. Therefore, the $300 million spent on domestically produced capital equipment contributes to GDP.

Suppose That Business Firms Spend $500 Million on New Capital