45. An increase in which of the following would cause an increase in the United States gross domestic product?
Answer: C
Exports would cause an increase in the United States gross domestic product.
An increase in exports directly contributes to the gross domestic product (GDP) as it represents domestic production that is sold to foreign consumers. When exports rise, it indicates that the economy is producing more goods and services that are in demand internationally.
A) Income taxes
Increasing income taxes generally leads to a reduction in disposable income for consumers, which can decrease consumption and, consequently, lower GDP. Higher taxes could discourage spending and investment, negatively impacting economic growth.
B) Imports
An increase in imports typically has a negative effect on GDP as it reflects consumption of goods produced outside the country. While imports can provide consumers with more choices, they do not contribute to domestic production and can detract from the GDP figure.
C) Exports
An increase in exports boosts the GDP as it signifies that more goods and services produced within the United States are being sold abroad. This not only enhances domestic production but also generates income for businesses and employment opportunities in the economy.
D) Long-term interest rates
Higher long-term interest rates can lead to reduced investment and borrowing, potentially slowing economic growth. While they influence economic activity, an increase in interest rates does not directly lead to an increase in GDP like rising exports would.
Conclusion
Exports are a critical component of GDP calculation, and their increase signifies enhanced economic activity and productivity. Other options, such as income taxes, imports, and long-term interest rates, either contribute negatively or do not foster significant growth in GDP. Hence, exports are the only choice that aligns with the goal of increasing the United States gross domestic product.