How is the purchase of a BMW car worth Rs40,000, manufactured entirely in Germany, recorded in Pakistan's GDP accounts?

Show Answers

Consumption rises by Rs40,000 while net exports fall by Rs40,000Net exports increase by Rs40,000No effect occurs since the product was not made domesticallyInvestment grows by Rs40,000 and net exports also increase by Rs40,000

Explanation

When a foreign-made car is bought in Pakistan, consumption expenditure increases by Rs40,000; however, since the car is imported, net exports decrease by the same amount. Therefore, the correct recording is an increase in consumption and a corresponding decrease in net exports.