Categories of expenditures

Bob and Cho Iverson live in Swarthmore, PA. Their son, Eric, owns his own plumbing business.

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). Check all that apply.

Transaction

1. Bob buys a sweater made in Guatemala.

2. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.

3. Cho gets a new video camera made in the United States.

4. Eric buys a new set of tools to use in his plumbing business.

5. Bob's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China.

Question

Tasha

Business

22 February, 01:40

Categories of expenditures

Bob and Cho Iverson live in Swarthmore, PA. Their son, Eric, owns his own plumbing business.

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). Check all that apply.

Transaction

1. Bob buys a sweater made in Guatemala.

2. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.

3. Cho gets a new video camera made in the United States.

4. Eric buys a new set of tools to use in his plumbing business.

5. Bob's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China.

+4

Answers (1)

Know the Answer?

Alvaro Mckay · Answer 1

1. Bob buys a sweater made in Guatemala. - it is an import (M), not included in GPD.

Imports are substracted from exports to reach net exports, which are part of GDP. This is an import because Bob lives in the U. S. and the sweater was made in Guatemala.

2. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. - Government purchases (G), included in GDP.

It is a government purchase because it is the state authority who is investing the resources in repaving the highway.

3. Cho gets a new video camera made in the United States. - it is consumption (C), included in GDP.

Cho lives in the U. S. and buys a camera made in the U. S., this is private consumption.

4. Eric buys a new set of tools to use in his plumbing business. - it is investment (I), included in GDP.

Investment are the purchases of goods, by private individuals or firms, with the goal of obtaining future economic benefits from their use. In other words, Investment is the purchase of assets. Eric is buying an asset for his business: a set of tools.

5. Bob's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China. - it is an export (X), included in GDP.

Exports are goods and services, produced domestically, but sold abroad. Bob is providing a service to a foreign company, and as an person living in the U. S., the value of that service is an export, and included in the GDP calculation.