Question

Suppose output is $440 billion, government purchases are $40 billion, desired consumption is $320 billion, and net exports are $35 billion. Absorption is equal to

A) $405 billion.
B) $420 billion.
C) $435 billion.
D) $440 billion.

Answer 1

The correct absorption, calculated by summing government purchases, desired consumption, and net exports, is $395 billion. None of the provided options (A, B, C, D) match this calculated value.

The absorption of output in an economy is the sum of government purchases, desired consumption, and net exports. In this scenario, government purchases amount to $40 billion, desired consumption is $320 billion, and net exports stand at $35 billion. To calculate absorption, one adds these components:

`\[ \text{Absorption} = \text{Government Purchases} + \text{Desired Consumption} + \text{Net Exports} \]`

Substituting the given values:

`\[ \text{Absorption} = $40 \text{ billion} + $320 \text{ billion} + $35 \text{ billion} = $395 \text{ billion} \]`

The correct absorption in this case is $395 billion. However, none of the provided options (A, B, C, D) match this calculated value. It's possible there is an error in the question or the options. To accurately reflect the absorption, the correct answer should be stated as $395 billion, not matching any of the provided choices. It is advisable to verify the information or consult the source to ensure accuracy in the given data and options.