Question

When an American household purchases a bottle of Italian wine for $100, a. U.S. consumption does not change, U.S. net exports decrease by $100, and U.S. GDP decreases by $100. b. U.S. consumption does not change, U.S. net exports increase by $100, and U.S. GDP increases by $100. c. U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.

Answer 1

Answer:

correct option is c

U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change

Explanation:

we know here US purchases a bottle of Italian wine for $100

so as

if a person consumes goods then consumption will increase

and here goods is Italian wine so import will increases and as a result net export decreases

and GDP not include Net exports

and it takes into account only in domestic product so GDP does not change

so correct option is c

U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change