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AP®︎/College Macroeconomics

Lesson 1: The Circular Flow and GDP

The circular flow model and GDP

In Fitlandia a

$ 100 million

skyscraper is constructed over two years. In year

1

$ 60 million

is spent on its construction, and in year two

$ 40 million

is spent.

How will the construction of these skyscrapers impact Fitlandia's gross domestic product (GDP) in year $1$ ‍ and year $2$ ‍?

(Choice A)
Unaffected in year $1$ ‍; increases by $$ 100 million$ ‍ in year $2$ ‍
(Choice B)
Unaffected in year $1$ ‍; unaffected in year $2$ ‍
(Choice C)
Increases by $$ 100 million$ ‍ in year $1$ ‍; unaffected in year $2$ ‍ GDP
(Choice D)
Increases by $$ 60 million$ ‍ in year $1$ ‍; increases by $$ 40 million$ ‍ in year $2$ ‍
(Choice E)
Increases by $$ 40 million$ ‍ in year $1$ ‍; increases by $$ 60 million$ ‍ in year $2$ ‍