Question

Suppose the following transactions occur during the current year:1. Jacques 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. Musashi, 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.

Answer 1

Answer:

$9,000

Explanation:

Step 1: Calculation of the total amount of each transaction

1. Jacques' bottles of wine = 50 × $30 = $1,500

This is an import since Jacques orders the bottles of wine from a French distributor.

2. A U.S. company textbook sales = 200 × $45 = $9,000

This is an export since a U.S. company sells the textbooks to a Canadian company.

3. Musashi's laptop = $1,500

This a consumption or domestic spending since it is a U.S. citizen that orders the laptop from a U.S. company

Step 2: Calculation of combined effect on the US national accounts this year

We use the following national accounts equation:

GDP = C + I + G + (X - M)  .................................. (1)

Where;

GDP = Gross Domestic Product = ?

C = Consumption or domestic spending = $1,500

I = Investment = 0

G = Government expenditure = 0

X = Exports - $9,000

M = Imports - $1,500

(X - M) = Net Exports = $9,000 - $1,500 = $7,500

Substituting the values into equation (1), we have:

GDP = $1,500 + 0 + 0 + $7,500 = $9,000.

Therefore, the combined effect of these transactions on the US national accounts for the current year is a contribution of $9,000 to the GDP.