Suppose the following transactions occur during the current year: 1. Rajiv orders 40 cases of beer from a Dutch distributor at a price of $40 per case.
2. A U. S. company sells 200 transistors to a Spanish company at $15.00 per transistor.
3. Yakov, a U. S. citizen, pays $1,100 for a computer he orders from Dellosoft (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.

Amount
Consumption
Investment
Government Purchases
Imports
Exports
Net Exports
Gross Domestic Product (GDP)

Consumption - $2,700

Investment - $0

Government Purchases - $0

Imports - $1,600

Exports - $3,00

Net Exports - $1,400

Gross Domestic Product (GDP) - $4,100

Explanation:

1. Consumption.

Consumption is the amount of goods and services consumed in the economy in a given period by citizens themselves. Things such as beer and laptops fall under here.

The consumption for the above economy are the computer purchased as well as the beer.

Adding them up would be,

= 1,100 + (40* 40)

= 1,100 + 1,600

= $2,700

Consumption is $2,700

Investment refers to the amount of money that private citizens spend on either investments or on Capital projects such as buildings. There are none here so the answer is $0.

Government Purchases are straightforwardly the transactions that involved the Government paying for goods and services. There are no such transactions here either so the answer is $0.

Imports are goods and services purchased from a foreign company by a consumer in the local Economy. From the above scenario there is a purchase from a Dutch Distributor. This is an import.

Imports are therefore,

= $40 * 40 cases of beer.

= $1,600.

Exports are goods and services that are bought by a foreign company from the local Economy. From the above there is an Export of 200 transistors to Spain.

That means that the exports in the Economy total,

= 200 * $15

= $3,000

The Net Exports are calculated by Subtracting Imports from Exports.

= 3,000 - 1,600

= $1,400

The Gross Domestic Product is a very important Economic measure that calculates the amount of goods and services produced in an Economy within a given period which is usually a year. The goods must be finished goods as intermediate goods would results in an overestimation due to Double Counting.

The formula for the GDP calculation is,

= C + G + I + X - M

Where,

C is Consumption

G is Government Spending

I is Investment and

X - M is Net Imports

GDP = 2,700 + 0 + 0 + 1,400

GDP = $4,100