Indicate which components of GDP (if any) that each of the following transaction
ID: 1180375 • Letter: I
Question
Indicate which components of GDP (if any) that each of the following transactions would affect. Use a plus sign (+) if the transaction increases the component and a minus sign (-) if the transaction decreases the component. If no component is affected by the transaction leave it blank.
Indicate which components of GDP (if any) that each of the following transactions would affect. Use a plus sign (+) if the transaction increases the component and a minus sign (-) if the transaction decreases the component. If no component is affected by the transaction leave it blank.
? Consumption Investment GovernmentPurchases Net
Exports 1. A family buys a new refrigerator 2. Aunt Jane buys a new house 3. Ford sells a Mustang from its inventory 4. You buy a pizza 5. California repaves Highway 101 6. Your parents buy a bottle of French wine 7. Honda expands its factory in Marysville, Ohio Some one tell me where i should put + and where i should put - sign?
Explanation / Answer
1. What components of GDP (if any) would each of the following transactions affect? What will happen to GDP? Explain.
a. A family buys a new refrigerator.
Answer: Consumption increases because a refrigerator is a good purchased by a household. GDP increases.
b. Aunt Jane buys a new house.
Answer: Investment increases because a house is an investment good. GDP increases.
c. Ford sells a Mustang from its inventory.
Answer: Consumption increases because a car is a good purchased by a household, but investment decreases because the car in Fords inventory had been counted as an investment good until it was sold. GDP is unaffected.
d. You buy a pizza.
Answer: Consumption increases because pizza is a good purchased by a household. GDP increases.
e. California repaves Highway 101.
Answer: Government purchases increase because the government spent money to provide a good to the public. GDP increases.
f. Your parents buy a bottle of French win. GDP is unaffected.
Answer: Consumption increases because the bottle is a good purchased by a household, but net exports decrease because the bottle was imported.
g. Honda expands its factory in Marysville, Ohio.
Answer: Investment increases because new structures and equipment were built. GDP increases.