Chapter 1. Chapter 8a (19a)

Step 1

Solved Problems
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You must read each slide, and complete any questions on the slide, in sequence.

Question

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Aggregate expenditure is the sum total of consumption (C), investment (I), government expenditure (G), and net exports [exports (X) minus imports (M)]. All are positive, adding to the GDP, except for imports, because purchases abroad do not countand must be subtracted out.

Step 2

Question

Which component of domestic aggregate expenditures would the following be considered to be part of?

A federally-funded construction project: a0p3JT5/IPxyybgvCb70vg==

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Since this purchase is conducted by the federal government, it counts as G.

Step 3

Question

Which component of domestic aggregate expenditures would the following be considered to be part of?

A business’ purchase of a new forklift: DnT1deWcbccPlHJY248/AA==

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This is an increase in the capital stock purchased by a firm, so it is investment.

Step 4

Question

Which component of domestic aggregate expenditures would the following be considered to be part of?

A household’s purchase of a (domestically produced) personal computer: 84HlgD/uzKoHlWwsfQwqRg==

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Although computers are considered to be capital, household purchases count as consumption.

Step 5

Question

Which component of domestic aggregate expenditures would the following be considered to be part of?

A household’s purchase of a (foreign-made) personal computer: kHACjLkwA9KrFYJMH77BLQ==

3
In this case, the computer is an import.

Step 6

Question

Which component of domestic aggregate expenditures would the following be considered to be part of?

A foreign firm’s purchase of a domestically produced automobile: A/solD5vWl9iactYcMCq3w==

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This is an export from the domestic country. It is only an import for the foreign country’s GDP.