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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.

a. Hubert buys a sweater made in Guatemala.
b. Kate's father in Sweden orders a bottle Of Vermont maple syrup from the producer's website.
c. The State of Pennsylvania repaves highway PA 320, Which goes through the center Of Swarthmore.
d. Kate gets a new refrigerator made in the United States.
e. Hubert's employer upgrades all of its computer systems using U.S.-made parts.

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Answer:

GDP is the total market value of all the goods and services produced in a country at a given period of time. The five components of GDP are:

Explanation:

1. Consumption (C) : This involves all the private consumption spending or consumer spendings on goods and services such as on groceries, jewelry and clothing.

Kyoko gets a new refrigerator made in the United States - This is a form of consumption because the commodity is produced, bought and also consumed within domestic boundaries. Consumption includes durable goods, non-durable goods as well as services.

2. Investment (I) : This involves the private domestic investment and/or capital expenditure. This is incurred when businesses spend money to invest in their business activities.

Jacque’s employer upgrades all of his computer systems using U.S made parts - The money spent on upgrading computer systems will help increase the productivity and efficiency of business processes in the long run, hence is a form of investment.

3. Government spending (G) : This relates to government consumption expenditures and gross investment. Involves government spending on equipment, infrastructure and payroll.

The State of Pennsylvania replaces highway PA320, which goes through the center of Swathmore - The government has utilized its fund to construct a highway, which is an example of improving its infrastructure and benefiting the public, hence a form of government spending.

4. Exports (X) : Goods and services produced domestically, that are bought by those in other countries.

Kyoko’s father in Sweden orders a bottle of Vermont maple syrup from the producer’s website - This is a form of an export because the syrup that is produced domestically is being sold to someone in another country.

5. Imports (M) : The goods and services produced by another country which are brought into the domestic country.

Jacques buys a sweater made in Guatemala - This is a form of imports since it is produced outside domestic borders and is being purchased to be consumed within the country.

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