Question

3. Categories of expenditures Gilberto and Juanita Jones live in Swarthmore, PA. Juanita's father, Lorenzo, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Transaction C I G X M Gilberto buys a bottle of Italian wine. Juanita's father in Sweden orders a bottle of Vermont maple syrup from the producer's website. Juanita gets a new video camera made in the United States. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. Gilberto's employer upgrades all of its computer systems using U.S.-made parts. PLease also explain how the answer came about

Answer 1

The national income identity C + I + G + X - M records all the transactions that are a part of GDP

• Gilberto buys a bottle of Italian wine. These are a part of consumption spending as well as imports because wine is made in Italy so no domestic production takes place.
• Juanita's father in Sweden orders a bottle of Vermont maple syrup from the producer's website. These are a part of exports because Vermont maple syrup is made in the US so domestic production takes place.
• Juanita gets a new video camera made in the United States. This will be a part of consumption expenditure as the product is manufactured within the national boundaries of US. So this will be the part of the US GDP
• The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. This will be a part of Government spending as state of Pennsylvania spends on goods and services
• Gilberto's employer upgrades all of its computer systems using U.S.-made parts. This will be a part of investment spending because the firm is investing money in its projects.