Which component is affected when a household buys a foreign laptop?
Answer and explanation
Correct answer: Imports
A laptop manufactured abroad is an imported final good when purchased by a domestic household. The household payment is initially part of consumption expenditure, but the expenditure formula subtracts imports: GDP = C + I + G + (X − M). Subtracting M prevents foreign production from being incorrectly counted in domestic output. Therefore, the directly affected external-sector component is imports.
Frequently asked questions
What is the correct answer to this question?
Imports
Why is this the correct answer?
A laptop manufactured abroad is an imported final good when purchased by a domestic household. The household payment is initially part of consumption expenditure, but the expenditure formula subtracts imports: GDP = C + I + G + (X − M). Subtracting M prevents foreign production from being incorrectly counted in domestic output. Therefore, the directly affected external-sector component is imports.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Expenditure Method.
