Question

Spartan Spaces creates room set-ups for college dorms.

Spartan Spaces purchases

Bedding for room set-ups from companies in the US for $8,000;

wall shelving for room set-ups from companies in China for $2,300;

equipment for packaging the set-ups to mail from a Chicago company for $1,000

Spartan Spaces sells

50 room set-ups to students at MSU for $100 per room;

50 room set-ups to students at Western Ontario University for $120 per room.

a.How much does each component of US GDP change?

US Consumption_______________

US Investment________________

US Government purchases____________

US Net Exports ____________________

b. What is the change in GDP? ___________________

Answer 1

Bedding US = $8000 (Domestic)
Wall Shelve China =$2300 (Import)
Packaging Chicago = $1000 (Domestic)

Revenue from MSU Rooms =$50*100 = 5000
Revenue from Western Ontario University Rooms = $50*120 = $6000

a1) US Consumption (Revenue from MSU Rooms) = $50*100 = $5000 (Goods and services for household)
a2) US Investment (Total amount invested in business) = $8000 + 2300+1000 = $11300
a3) US Government Expenditure = $8000 + 2300+1000 = $11,300
a4) US Net Export = total value of exports - total value of imports
                       = $6000 - (2300+1000) = 6000 - 3300 = $2700
b) Change in GDP = C+I+G+(X-M)
                       = 5000 +11300+11300 +(6000-2300)
                       = $31300.