Asked by Noemi Villalobos on Jul 21, 2024

verifed

Verified

Since it is counted as investment, why doesn't the purchase of earthmoving equipment from China by a U.S. corporation increase U.S. GDP?

Earthmoving Equipment

Earthmoving equipment consists of heavy-duty vehicles designed for construction tasks, especially ones involving earthwork operations.

U.S. GDP

The total monetary value of all goods and services produced within the United States' borders in a specific time period, often used as an indicator of economic health.

Investment

Investment entails the allocation of resources, such as capital or time, into a venture with the expectation of generating income or profit over time.

  • Examine the impact of global transactions on the Gross Domestic Product of a nation.
verifed

Verified Answer

DR
Doris RiveraJul 23, 2024
Final Answer :
The purchase of foreign equipment is counted as investment, but GDP measures only the value of production within the geographic borders of the United States. In order to avoid including the value of the imported equipment, imports are subtracted from GDP. Hence, the value of the equipment in investment is canceled by subtracting its value as an import.