Question

Suppose the following transactions occur during the current year:_______. 1. Kevin orders 50 bottles of wine from a French distributor at a price of $30 per bottle. 2. A U.S. company sells 200 textbooks to a Canadian company at $45.00 per textbook. 3. Rajiv, a U.S. citizen, pays $1,500 for a laptop he orders from Microell (a U.S. company).Complete the following table by indicating how the combined effects of these transactions will be reflected in the U.S. national accounts for the current year.Hint: Remember to enter a minus sign when the balance is negative. Amount (Dollars) Consumption Investment Government Purchases Imports Exports Net Exports Gross Domestic Product (GDP)

Answer 1

Answer and Explanation:

1. Consumption = Kevin's purchase of wine + Rajiv purchase of laptop

= 30 × 50 + 1,500

= 1,500 + 1,500

= $3,000

2. Investment = 0

3. Government purchase = 0

4. Imports = Kevin's purchase of wine = 30 × 50

= 1,500

5. Exports = US company selling to Canada = 45 × 200

= $9,000

6. Net exports = Exports - Imports

= $9,000 - $1,500

= $7,500

7. GDP = Consumption + Investment + Government spending + Net exports

= 3,000 + 0 + 0 + 7,500

= $10,500