Question

The given scenarios relate to the different components of the expenditure approach for this year's U.S. GDP. It is possible that a scenario does not fit this year's U.S. GDP. Select the component of the expenditure approach each scenario represents.

a. A car manufacturer from outside the U.S. builds another car factory in Alabama.
b. Skip Dover buys his parents a home that was completed earlier this year. c.

Answer 1

Scenario a and b relate to the investment and consumption components of the expenditure approach for GDP, representing business and consumer spending, respectively.

Step-by-step explanation:

The given scenarios relate to the different components of the expenditure approach for this year's U.S. GDP. When examining the scenarios provided:

• Scenario a: A car manufacturer from outside the U.S. builds another car factory in Alabama falls under business spending oftentimes referred to as investment.
• Scenario b: Skip Dover buys his parents a home that was completed earlier this year represents consumer spending which is also known as consumption expenditure.

These components are crucial for calculating the GDP as they demonstrate how aggregate expenditures adjust as national income—real GDP—rises.