Reconciling National Accounts
An economist observes the following annual data for a country: total spending by households on goods and services is $10 trillion; total spending by businesses on new equipment and structures is $3 trillion; total government purchases of goods and services are $4 trillion; and total sales of domestically produced goods to foreigners are $2 trillion. However, the country's officially reported total domestic output for that year is only $18 trillion. Explain mathematically how this is possible, identifying the specific expenditure component that must account for the discrepancy and calculating its value.
0
1
Tags
Economics
Economy
Introduction to Macroeconomics Course
Ch.3 Aggregate demand and the multiplier model - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
Science
Analysis in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
A domestic manufacturing firm produces $50 million worth of goods in a specific quarter. During that same quarter, it sells $40 million of these goods to domestic consumers and adds the remaining $10 million of unsold goods to its warehouse. Based on these transactions alone, how is the country's Gross Domestic Product (GDP) for the quarter directly affected?
An economy's total output is measured by the sum of its spending components. Match each economic transaction below with the primary component of expenditure it represents.
Calculating GDP from Expenditure Data
Rationale for Subtracting Imports in National Accounts
A government's decision to increase social security payments to retirees will directly increase the government spending component of that nation's Gross Domestic Product.
A U.S. household purchases a new car for $30,000 that was manufactured entirely in Germany. How does this transaction, by itself, affect the components of the U.S. Gross Domestic Product (GDP) as measured by the expenditure approach?
Evaluating the Impact of Imports on National Output
Reconciling National Accounts
A domestic corporation raises $20 million by issuing new shares of stock. It then uses $15 million of these funds to construct a new manufacturing plant. How do these two transactions, taken together, affect the nation's Gross Domestic Product (GDP) for the current period as measured by the expenditure approach?
A household sells its two-year-old car to another household for $15,000. To facilitate the sale, they use a dealership which charges a 5% commission fee. How does this entire set of transactions affect the current year's Gross Domestic Product (GDP) as measured by the expenditure approach?
Simplifying the Aggregate Demand Model for a Closed, Private Economy