Jack and Erin Smith live in Swarthmore, Pennsylvania. Their son, Brian, owns his
ID: 1217523 • Letter: J
Question
Jack and Erin Smith live in Swarthmore, Pennsylvania. Their son, Brian, owns his own plumbing business. 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). If the transaction needs to be accounted for in more than one category, check each applicable box. Transaction C X G X M Jack buys a sweater made in Guatemala. Erin gets a haircut. Jack's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China. The town of Swarthmore puts on a fireworks display for the Fourth of July. Brian buys a new set of tools to use m his plumbing businessExplanation / Answer
1. Jack buys sweater made in Guatemala: This will be inculded in imports(M) as it is imported good that is consumed.
2. Erin gets a haircut : It will be included in consumption(C) as it includes consumption of good and service.
3. Providing consulting services to Australian company : This will be included in exports(X) as it services are provided to foreign countries.
4. Town of Swarthmore puts on fireworks display : It will not be included in any component as it is not adding to production of goods and services in any way.
5. Brian buys a set of plumbing tools for his business : This will be included in investment (I) as it is fixed investment for his business.
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