Reference no: EM13815055
For each of the following transactions, how much does US GDP increase? And how much, if at all, do consumption, investment, government purchases and net exports change?
1. Peter Rich buys a 1928 painting by Pablo Picasso at an auction for $1 Million. In addition to the purchase price, he pays a services fee of $30,000 to the auction house.
2. A US automobile maker buys car parts for $50,000 from Mexico. Those parts are assembled together with American parts (made in the current year) and 10 cars are built. Eight of these cars sell for $20,000 each in the US, one is sold to Canada for $20,000, and one is kept as inventory, valued at $18,000.
3. Peter Rich pays $100,000 in income taxes. Half of this revenue is used by the government to pay the salary of an employee of the Department of Labor, and the other half is used to pay unemployment benefits.
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: Questions are uploaded as attachments.
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