What happens to us gdp going forward

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Reference no: EM131481670

Question: Let's think about how imports affect official GDP statistics. Recall from that GDP is computed as:

GDP = Y = C + I + G + NX

Assume that originally U.S. GDP is $10 trillion, but that the economy is closed and there are no imports or exports. Now the nation of Bataslava begins selling high-quality automobiles in the United States but charges a very low price-say, $5 each. Assume that U.S. consumers use this opportunity to substitute out of U.S. produced automobiles and into automobiles from Bataslava, and that spending on other U.S. goods does not change.

a. What happens to U.S. GDP going forward?

b. Is this a positive or negative development for the United States? Why?

c. What would be an argument for a tariff on the Bataslavian cars?

Reference no: EM131481670

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