Exchange Rate Regimes

Overview

1. Give a brief explanation describing how GDP (Gross Domestic Product) has helped research and explore domestic GDP for this assignment.
2. Why does inflation make nominal GDP a poor measure of the increase in total production?
3. Which component of GDP will be affected by each of the following transactions involving "American Cars R Us Rental"? Briefly explain.
   
   Hint on the components of the GDP: GDP = C + I + G + Nx
    
   1. You use American Cars R Us Rental on your next vacation.
   2. American Cars R Us Rental purchases auto parts from foreign companies.
   3. American Cars R Us Rental spends $50,000,000 to update their inventory, marketing, and technology.
   4. American Cars R Us Rental purchases 5,000 American automobiles from their competitors.
   5. The federal government decides to subsidize any “fuel-efficient” experiments with the cars that American Cars R Us Rental decides to purchase.