Question

Jake and Latasha Lalime live in Swarthmore, PA. Latasha's father, Musashi, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M).

A. Latasha gets a new video camera made in the United States.
B. Latasha's father in Sweden orders a bottle of Vermont maple syrup from the producer's website.
C. Jake's employer upgrades all of its computer systems using U.S.-made parts.
D. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.
E. Jake buys a bottle of Italian wine.

Answer 1

a. consumption

b. export

c. Investment

d. Government spending

e. consumption, import

Step-by-step explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export

Net export = exports – imports

When exports exceeds import there is a trade deficit and when import exceeds import, there is a trade surplus.

Items not included in the calculation off GDP includes:

1. services not rendered to oneself

2. Activities not reported to the government

3. illegal activities

4. sale or purchase of used products

5. sale or purchase of intermediate products

Latasha's purchase of the made in US video camera would be added as part of consumption spending by households on durable goods.

Latasha's father's purchase of Vermont syrup would be added as export in US's GDP. Export are goods that are sold to other countries.

government purchases includes all of the government spending.

the computer upgrade would be added a part of investment. Investment includes all of business spending.

Jake imported the wine, so it would be recorded as import and also as part of consumption spending on non durable goods