Math Problem Statement

Suppose the following transactions occur during the current year:

  1. Alex orders 60 cases of beer from a Dutch distributor at a price of $40 per case.
  2. A U.S. company sells 300 axles to a Spanish company at $15.00 per axle.
  3. Clancy, a U.S. citizen, pays $1,500 for a computer he orders from Honeycrisp (a U.S. company). Complete the following table by indicating how the combined effects of these transactions will be reflected in the U.S. national accounts for the current year. Hint: Be sure to enter a “0” if none of the transactions listed are included in a given category and to enter a minus sign when the balance is negative. Amount (Dollars) Consumption Investment Government Purchases Imports Exports Net Exports Gross Domestic Product (GDP)

Solution

To analyze the effects of the given transactions on U.S. national accounts, we will categorize each transaction based on how they impact consumption, investment, government purchases, imports, exports, net exports, and Gross Domestic Product (GDP).

Transaction Breakdown

  1. Alex orders 60 cases of beer from a Dutch distributor at a price of $40 per case.

    • Total cost = 60 cases × $40/case = $2,400
    • This is an import since the beer is purchased from a foreign distributor.
  2. A U.S. company sells 300 axles to a Spanish company at $15.00 per axle.

    • Total revenue = 300 axles × $15/axle = $4,500
    • This is an export since the axles are sold to a foreign company.
  3. Clancy, a U.S. citizen, pays $1,500 for a computer he orders from Honeycrisp (a U.S. company).

    • This is consumption since Clancy is purchasing from a domestic company.

Effects on National Accounts

Now, we will populate the table based on the analysis:

CategoryAmount (Dollars)
Consumption1,500
Investment0
Government Purchases0
Imports2,400
Exports4,500
Net Exports4,500 - 2,400 = 2,100
Gross Domestic Product (GDP)1,500 + 4,500 = 6,000

Final Table

CategoryAmount (Dollars)
Consumption1,500
Investment0
Government Purchases0
Imports2,400
Exports4,500
Net Exports2,100
Gross Domestic Product (GDP)6,000

Summary

  • Consumption: $1,500 from Clancy’s purchase.
  • Investment: $0 as there were no investments.
  • Government Purchases: $0 since there were no government transactions.
  • Imports: $2,400 from the beer order.
  • Exports: $4,500 from the sale of axles.
  • Net Exports: $2,100 (Exports - Imports).
  • GDP: $6,000 (Consumption + Exports).

Would you like more details or have any questions? Here are some related questions you might find interesting:

  1. How do imports and exports impact the balance of trade?
  2. What is the significance of GDP in economic analysis?
  3. How do consumption expenditures affect economic growth?
  4. Can you explain the difference between Gross Domestic Product and Gross National Product?
  5. How would government purchases influence GDP?

Tip: Always consider the direction of transactions (import vs export) when analyzing their effects on national accounts.

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Math Problem Analysis

Mathematical Concepts

National Accounts
GDP Calculation
Trade Balance

Formulas

Net Exports = Exports - Imports
GDP = Consumption + Exports

Theorems

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Suitable Grade Level

Grades 11-12