Question

For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GOP as part of consumption (C), investment (), government purchases (G), exports (X), or imports (M).

a. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.
b. Sam's employer upgrades all of its computer systems using U.S-made parts.
c. Teresa's father in Sweden orders a bottle of Vermont maple syrup from the producer's website.
d. Sam buys a sweater made in Guatemala.
e. Teresa gets a new refrigerator made in the United States.

Answer 1

a. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. - Gonverment purchases (G)

Government purchases include all expenses incurred by the government, like investment in public roads or public schools. It does not include transfer payments like social security or medicare though.

b. Sam's employer upgrades all of its computer systems using U.S-made parts. - Investment (I)

Investment includes all purchases made by private firms with the goal of increasing their assets, and economic profit.

c. Teresa's father in Sweden orders a bottle of Vermont maple syrup from the producer's website. - exports (X)

Exports are all goods and services, produced domestically (Vermont) and sold abroad (Sweden).

d. Sam buys a sweater made in Guatemala. - imports (M).

Imports are all goods and services, produced abroad (Guatemala), and consumed by domestic individuals or firms (Sam)

e. Teresa gets a new refrigerator made in the United States. - consumption (c)

Consumption includes all goods and services purchased by individuals and households in the United States.