Title: QUIZ: Do Imports Subtract from GDP?
Course: FRED Q&A Full Course > Section: FRED® Q&As -- GDP

Q: Why does the GDP expenditure equation subtract imports (M)?
- Because imports reduce domestic production (That is incorrect.)
- To penalize foreign trade in GDP calculations (That is incorrect.)
- To ensure only domestic production is counted (That's correct!)
- Because imports represent a loss of national income (That is incorrect.)
A: To ensure only domestic production is counted

Q: If a consumer spends $30,000 on an imported car, what is the net effect on GDP?
- GDP decreases by $30,000 (That is incorrect.)
- GDP increases by $30,000 (That is incorrect.)
- GDP remains unchanged (That's correct!)
- GDP decreases by the value of exports (That is incorrect.)
A: GDP remains unchanged

Q: Why might the FRED graph showing negative net exports be misleading?
- It incorrectly calculates GDP. (That is incorrect.)
- It suggests imports reduce GDP. (That's correct!)
- It excludes government spending. (That is incorrect.)
- It overstates the role of exports. (That is incorrect.)
A: It suggests imports reduce GDP.

Q: Which statement best describes the role of imports (M) in GDP calculation?
- Imports are treated as an expenditure variable. (That is incorrect.)
- Imports directly reduce GDP. (That is incorrect.)
- Imports are an accounting variable to adjust for foreign production. (That's correct!)
- Imports increase GDP when exports are high. (That is incorrect.)
A: Imports are an accounting variable to adjust for foreign production.