Suppose the following transactions occur during the current year:

1. Dmitri orders 50 cases of beer from a Dutch distributor at a price of $40 per case.
2. A U. S. company sells 200 transistors to a Spanish company at $15.00 per transistor.
3. Jake, a U. S. citizen, pays $1,500 for a laptop he orders from Microell (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. Amount (Dollars)Consumption Investment Government Purchases Imports Exports Net Exports Gross Domestic Product (GDP)

These transactions combines will increase the Gross Domestic Products by +2500

Explanation:

Gross domestic product is the Value of all goods and service produced within the boarders of the country over a period of time. Gross domestic product is measured in monetary terms. Gross domestic product can also be calculated as a total of all expenditures on goods and services in the economy.

we will now sow how these Transactions affect the gross domestic product

1. 50 cases of beer from a dutch distributor at $40 per case

When Dmitri (assuming he is in the United States) Purchases a 50 cases of beer abroad, Imports increase by $2000 ($40 x 50 cases)

Imports have a negative impact on the Gross domestic product, Therefore the Gross domestic product will decrease by $2000

-$2000 imports = -2000 Gross Domestic Product. ceteris pa

2.US Company sells 200 Transistors to a Spanish company at $15 per case

Exports increase Gross domestic product. When a US Company sells 200 transistors to a Spanish Company at a price of $15 per transistor, Exports will increase by $3000. When export increase Gross domestic product will also increase by -$3000 ceteris par

+$3000 export = + 3000 Gross Domestic Product.

3. Jake US Citizen pays $1500 for a laptop he orders from microell (a US company)

This transaction will increase Consumer's domestic consumption which is represent by a Variable denoted by C in the Consumption equation. When Jake pays $1500, Consumption increases by $1500 which also increases Gross domestic Product by $1500 ceteris pa

+$1500 Consumption = + $1500 Gross domestic product

Combined effect of these Transactions

Consumption + Investment + government spending + (export - import)= GDP

+$1500 + 0 + 0 + 0 + ($3000 - $2000) = + $2500        

These transactions combines will increase the Gross Domestic Products by +2500

The combined effect of the three economic transactions is an increase of $2,500 in the U.S. national accounts for the current year.

Explanation:

1. Dmitri orders 50 cases of beer from a Dutch distributor at a price of $40 per case.

This will be reflected as an import in the U.S. national accounts for the current year, and it will have a reducing effect on it. The total amount can be calculated as follows:

Import = 50 × $40 = $2,000

2. A U.S. company sells 200 transistors to a Spanish company at $15.00 per transistor.

This will be reflected as an export in the U.S. national accounts for the current year, and it will have an increasing effect on it. The total amount can be calculated as follows:

Export = 200 × $15 = $3,000

3. Jake, a U.S. citizen, pays $1,500 for a laptop he orders from Microell (a U.S. company).

This will be reflected as a consumption in the U.S. national accounts for the current year, and it will have an increasing effect on it.

The combined effect of the above transactions can be accounted for in the U.S. national accounts for the current year using an open economy national accounting equation presented as follows:

Y = C + I + G + NX ………………………………………… (1)

Where;

Y = Gross Domestic Product (GDP) = ?

C = Consumption = $1,500

I = Investment = 0

G = Government purchases = 0

X = Exports = $3,000

M = Imports = $2,000

NX = Net export = X – M = $3,000 - $2,000 = $1,000

Substituting the values into equation (1), we have:

Y = $1,500 + 0 + 0 + $1,000 = $2,500

Therefore, the combined effect of the three economic transactions is an increase of $2,500 in the U.S. national accounts for the current year.

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