Question

When a U.S. company purchases and imports automotive parts from Canada to use to build cars within the United States, this purchase increases the ______ (government puchases, investment or consumption)

Component of GDP while also ______ ( increasing or decreasing)

Therefore, the purchase of automotive parts from Canada causes ____ (no overall change, an overall increase or an overall decrease)

Answer 1

Investment; Decreasing; No overall change

Step-by-step explanation:

Gross domestic product (GDP) refers to the total value of goods and services produced within the boundaries of a nation.

If a company in United states purchases the automotive parts from Canada, this will increase the investment of that company situated in U.S. and at the same time, the imports of U.S. also increases.

GDP:

= Consumption + Investment expenditure + Government expenditure + Net exports

Where,

Net exports = Exports - Imports

A component of GDP is decreasing and that is net exports because of increase in imports.

Therefore, there is no overall change in the value of GDP because an increase in investment is offset by a decrease in net exports.