Question

A French family flies from Paris, France to New York City where they have a brief layover before flying to Montreal, Canada. While in New York the family has a $25 dollar lunch at a hot dog stand near Time Square. How does this lunch contribute to U.S. GDP?

a. U.S. GDP remains unchanged, but French GDP increases by 22 Euros ($25 U.S.).
b. GDP decreases by $25
c. GDP increases by $25
d. GDP does not change since the family is not from the U.S.

Answer 1

C

Step-by-step explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export

Consumption spending includes spending by households on goods and services. Consumption spending includes :

spending on durables - e.g. buying a laptop

spending on nondurables - e.g. buying clothes, food

spending on services - e.g. payment of hospital bill

the purchase of a textbook by a student is an example of consumption spending on durable goods

Investment - It includes purchases of goods and services made by businesses in the production of goods and services

Government spending - It includes government consumption expenditure and gross investment. The purchase of a new limousine for the president is an example of consumption expenditure

Net export = export - import

the purchase of hotdog constitutes consumption of non durable goods and this would increase US GDP by $25