Question

In: Economics

Exhibit: Totals Recorded for the United States (billions of dollars)* Durable goods consumption $ 497...

Exhibit: Totals Recorded for the United States (billions of dollars)*

Durable goods consumption $ 497

Nondurable goods consumption 1,301

Services consumption 2,342

Business fixed investment 566

Residential fixed investment 224

Inventory investment 7

Federal government purchases 449

State and local government purchases 683

Exports 640

Imports 670

Excess of GNP over GDP 7

Depreciation 658

Indirect business taxes 551

Corporate profits (includes wage accruals less disbursements) 387

Social insurance contributions 556

Net interest 442

Dividends (includes business transfer payments) 162

Government transfers to individuals 837

Personal interest income 694

Personal tax and nontax payments 645

What were the approximate ratios of consumption, investment, and government purchases to GDP?

Solutions

Expert Solution

Calculate consumption -

Consumption = Durable goods consumption + Non durable goods consumption + Services consumption

Consumption = 497 + 1301 + 2342 = 4140

The consumption is $4,140 billion.

Calculate investment -

Investment = Business fixed investment + residential fixed investment + Inventory investment

Investment = 566 + 224 + 7 = 797

The investment is $797 billion.

Calculate government purchases -

Government purchases = Federal government purchases + State and local government purchases

Government purchases = 449 + 683 = 1,132

The government purchases is $1,132 billion

Calculate net exports -

Net exports = Exports - Imports

Net exports = 640 - 670 = -30

The net exports is -$30 billion.

Calculate GDP -

GDP = Consumption + Investment + Government purchases + Net exports

GDP = $4,140 billion + $797 billion + $1,132 billion - $30 billion

GDP = $6,039 billion

The GDP is $6,039 billion.

Calculate the ratio of consumption to GDP -

Ratio = Consumption/GDP

Ratio = $4,140 billion/$6.039 billion

Ratio = 0.68

The ratio of consumption to GDP is 0.68

Calculate the ratio of investment to GDP -

Ratio = Investment/GDP

Ratio = $797 billion/$6.039 billion

Ratio = 0.13

The ratio of investment to GDP is 0.13

Calculate the ratio of government purchases to GDP -

Ratio = Government purchases/GDP

Ratio = $1,132 billion/$6.039 billion

Ratio = 0.19

The ratio of government purchases to GDP is 0.19

Rahul Sunny answered 1 year ago

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