If all other factors are held constant, an increase in imports
A) causes an increase in exports of the same size.
B) causes Gross Domestic Product (GDP) to increase.
C) causes Gross Domestic Product (GDP) to decrease.
D) can cause Gross Domestic Product (GDP) to increase or decrease, depending on whether the imports are purchased by consumers or by business firms.

Question

Quizplus · Accepted Answer

An increase in imports means that more domestic money is being spent on foreign goods instead of domestic goods. This reduces the demand for domestic goods and services, which can lead to a decrease in GDP.

If All Other Factors Are Held Constant, an Increase in Imports