GDP GDP and International Trade 2

Question 1

Which of the following best explains why a trade deficit does NOT automatically mean GDP is declining?

Accepted Answer

High imports can reflect strong domestic consumer demand that boosts C more than M reduces NX

Answer

Strong consumer spending can drive imports higher while simultaneously boosting GDP through robust consumption — the overall effect on GDP depends on all components.

Question 2

If the U.S. imposes a tariff on imported goods, the most likely direct effect on GDP in the short run is:

Accepted Answer

Net exports may improve as imports fall

Answer

Tariffs raise the cost of imports and typically reduce import volumes, which can improve net exports (X – M) in the short run.

Question 3

Which of the following U.S. sectors contributes most to export revenue and therefore has the largest positive impact on GDP through trade?

Accepted Answer

Capital goods and industrial machinery

Answer

Capital goods and industrial machinery represent the largest category of U.S. exports, making them a major driver of export-led GDP growth.

Question 4

How do remittances sent by U.S. immigrants to their home countries affect U.S. GDP?

Accepted Answer

They do not directly appear in GDP because GDP measures production, not transfers of money

Answer

Remittances are private transfers of money and are not counted in GDP, which records the value of goods and services produced.

Question 5

Which of the following is TRUE about the relationship between exchange rates and GDP?

Accepted Answer

A depreciation of the U.S. dollar makes U.S. exports cheaper, potentially increasing net exports and GDP

Answer

Dollar depreciation lowers the price of U.S. goods for foreign buyers, which can boost exports and improve net exports, adding to GDP.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP GDP and International Trade 2