Answer to Question #134319 in Macroeconomics for Syed Hasnat Ali

Question

Q4: State why each of the following statements is true or false:
a. In calculating GDP from the expenditure side, economists add imports to other aggregate expenditure components.
b. If gross investment rose by $60 million there must be a replacement investment by the same amount.

Answer 1

a. In calculating GDP from the expenditure side, economists substract imports from other aggregate expenditure components. So, the statement is false.

b. It's false, because if gross investment rose, there must be both replacement investment, for 

the capital that already exist and net investment to increase the economy's capital stock.