You buy a new car built in Sweden. Other things the same, your purchase by itself

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Question restatement: You buy a new car built in Sweden. Other things the same, your purchase by itself affects U.S. economic measures in what way?

Option 1: raises both U.S. exports and U.S. net exports. This is not correct because buying a foreign car increases imports, not exports. Exports are goods produced domestically and sold abroad, which this purchase does not involve, so exports do not rise.

Option 2: raises U.S. exports and lowers U.S. net exports. Again, exports would not rise from importing a foreign car; the act of buying a Swedish car does not create more U.S. exports. Net exports would also fall if imports rise, so this combination is inconsistent.

Option 3: raises both U.S. imports and U.S. net exports. While imports would rise due to purchasing a foreign car, net exports are exports minus imports; since imports rise without a corresponding rise in exports, net exports would actually decrease, not increase. Therefore this option is incorrect.

Option 4: raises U.S. imports and lowers U.S. net exports. Correct reasoning: importing a car from Sweden increases U.S. imports. Net exports = exports − imports; with imports increasing and no change in exports, net exports decline. Thus this statement accurately describes the effect.

Note on potential confusion: Some might think of “net exports” as a separate quantity or misinterpret the direction, but the key is that imports go up when you buy foreign goods, and unless exports rise by the same amount, net exports fall. The Swedish-origin car directly amplifies imports, and because exports are unchanged, net exports fall accordingly.

2254 ECON 0103 SEC2020 ECON 103 Homework 5

You buy a new car built in Sweden. Other things the same, your purchase by itself

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