1. Suppose the sum of consumption, planned investment, and government spending i

Question

1. Suppose the sum of consumption, planned investment, and government spending is $800 billion, where the figures for government spending included in that $800 billion includes: a) $5 billion interest payments on the national debt (government issued bonds), b) $15 billion social security payments, c) $25 billion expenditure on goods and services produced by the private sector in this country and d) $5 billion in goods produced by firms abroad. Additionally, firms have experienced an involuntary (unplanned) inventory reduction of $10 billion during the course of the year. If we export $8 billion more than we imported, measured GDP using the expenditures method for GDP accounting is _______. Show your work and briefly explain your answer below. 2. Suppose the economy consists of two consumer goods, Harley Motorcycles and Quiche. We have the following information regarding these two goods: Year Harley--Price--Quiche Harley--Quantity

Explanation / Answer

Y = C + I + G + NX (C + I + G) = 800 bil NX = 8 bil Y = 808 bil

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