A Minnesota farmer buys a new tractor made in lowa by a German company. As a result, (1) U.S. investment and GDP increase, but German GDP is unaffected. (2) U.S. investment and German GDP increase, but U.S. GDP is unaffected. (3) U.S. investment, U.S. GDP, and German GDP all increase. (4) U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods.

When a Minnesota farmer purchases a new tractor from a German company, several economic factors come into play: 1. **U.S. Investment**: The tractor is considered a capital investment for the farmer. This increases U.S. investment because the farmer is acquiring a new asset to use in production. 2. **U.S. GDP**: While investment increases, the purchase is an import. In the calculation of GDP using the expenditure approach (GDP = C + I + G + (X - M)), the import (M) increases by the value of the tractor, which offsets the increase in investment (I). Therefore, the net effect on U.S. GDP is neutral. 3. **German GDP**: The sale of the tractor contributes to Germany's exports (X). This increases German GDP because it is an export of goods produced within Germany. Given these points, the most accurate statement is: **Answer:** 2. U.S. investment and German GDP increase, but U.S. GDP is unaffected.