Question

In 2001, the United States government pays private contractors $10 billion to repair the interstate highway system through Salt Lake City in preparation for the 2002 Winter Olympics. As a result, in 2001 Multiple Choice GDP Increases by $10 billion, since government purchases are part of GDP. GDP is unaffected, since the government is using money which taxpayers would have spent anyway. GDP is unaffected, since no new roads are built. GDP decreases by $10 billion, since the repairs represent depreciation expenses.

Answer 1

GDP which is the final production value of goods and services that is produced within the domestic boundary of a country in a financial year

It is generally measured quarterly or yearly basis

Now if we talk from the expenditure method then GDP has four main components that are personal consumption, investment, government spending or purchases and net export

Where net export is the difference of export and import

Now when the United States Government pays the private contractors $10bn, it means it will come under the government purchases or the government spending to repair the interstate Highway system

So this will lead to to decrease the 10 billion dollar of GDP

The correct answer here is option d