Question

Suppose the following transactions occur during the current year:

1. Charles orders 50 cases of mescal from a Mexican distributor at a price of $90 per case.

2. A U.S. company sells 200 video-processor chips to a Chinese company at $10.00 per chip.

3. Gilberto, 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.

Hint: Be sure to enter a “0” if none of the transactions listed are included in a given category and to enter a minus sign when the balance is negative. Amount (Dollars)

Consumption

Investment

Government

Purchases

Imports

Exports

Net Exports

Gross Domestic Product (GDP)

Answer 1

Transaction 1

When goods are purchased from foriegn distributor then it is termed as imports.

So,

Imports = 50 * $90 = $4,500

Transaction 2

When goods are sold to foreigners then it is termed as exports.

Exports = 200 * $10 = $2,000

Transaction 3

Goods purchased by domestic consumers from domestic suppliers is regarded as consumption spending.

So,

Consumption = $1,500

Following is the complete table -

Items	Amount (Dollars)
Consumption	1,500
Government Purchases	0
Investment	0
Imports	4,500
Exports	2,000
Net exports	(2000 - 4500) -2,500
GDP	(-2,500 + 1,500) -1,000