Question 51

An increase in exports would cause an increase in the United States gross domestic product.

Increasing exports directly contributes to the gross domestic product (GDP) of the United States because it represents the value of goods and services produced domestically and sold to foreign buyers.

A) Income taxes

An increase in income taxes generally reduces disposable income for consumers, which can lead to decreased consumer spending. This reduction in spending can negatively impact GDP, making this option incorrect in the context of increasing GDP.

B) Imports

An increase in imports represents spending on foreign-produced goods and services, which does not contribute to the domestic production of GDP. Instead, it can lead to a trade deficit, making this option incorrect for increasing the GDP.

C) Exports

Increasing exports boosts GDP as it reflects the additional demand for domestically produced goods and services from international markets. This demand leads to higher production levels, job creation, and overall economic growth, making this the correct answer.

D) Long-term interest rates

An increase in long-term interest rates typically discourages borrowing and spending by both consumers and businesses. This can lead to reduced investment and consumption, negatively affecting GDP growth, thus making this option incorrect.

Conclusion

The correct answer is C) Exports, as increasing exports directly enhances the GDP by elevating demand for domestic products. In contrast, options A, B, and D either hinder economic activity or do not contribute positively to GDP, thereby confirming that only increasing exports will effectively lead to an increase in the United States' gross domestic product.