Question

Identify the component of aggregate expenditure to which each of the following belongs.

i. A Jamaican resident's purchase of a new automobile from Japan.
ii. A household's purchase of a new refrigerator.
iii. The construction of a new house.
iv. The government's acquisition of ten buses for the Jamaica Urban Transit Company.

Answer 1

Purchases made by individuals, households, and governments fall under various components of aggregate expenditure: imports, consumption expenditure, investment expenditure, and government spending, respectively.

Step-by-step explanation:

The components of aggregate expenditure include consumption expenditure, investment expenditure, government spending, and spending on net exports (exports minus imports). Based on these categories:

1. An individual's purchase of a new automobile from Japan is categorized as imports, which is subtracted from the net exports component.
2. A household's acquisition of a new refrigerator falls under the consumption expenditure category.
3. The construction of a new house is considered an example of investment expenditure.
4. The government's purchase of buses for the public transit company is classified within government spending.

Understanding how these purchases affect the components of aggregate expenditure provides insight into their impact on the overall economy, as national income rises.