Question

Raphael and Susan Firth live in Swarthmore, PA. Their son, Alex, owns his own plumbing business.

Answer 1

Answer:

a. Consumption (C).

b. Investment (I).

c. Imports (M) and consumption (C).

d. Exports (X).

e. Investment (I) and government purchases (G).

Explanation:

a. Susan gets a new video camera made in the United States: this is a consumption (C).

b. Alex buys a new set of tools to use in his plumbing business: this is an investment (I).

c. Raphael buys a sweater made in Guatemala: this is both an import (M) and consumption (C).

d. Raphael's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China: this is an export (X).

e. The Federal Aviation Administration expands the runways at Philadelphia International Airport, which is just a few miles from Raphael and Susan's house: this both an investment (I) and government purchases (G).

The Gross Domestic Products (GDP) is the measure of the total market value of all finished goods and services made within a country during a specific period.

Ultimately, this implies that Gross Domestic Products (GDP) is a measure of the total income of all individuals in an economy and the total expenses incurred on the economy's output of goods and services in a particular country.

Hence, GDP is the summation of the consumption (C), investment (I), net exports (N) [exports (x) - imports (M)] and government purchases (G).

Mathematically, GDP is given by the equation; $GDP = C + I + N + G$

Where, consumption (C) is the personal spending by households on various goods and services for their own pleasure.

Investment is the spending by business owners on equipments and other inventories to enhance productivity.

Government purchases is the expenditures made by state, local and federal government on goods and services for the general public.

Net exports (N) is the subtraction of imports (M) from exports (X) in a country at a particular period of time.