Question

4. Explain whether each transition reflects an increase in 2018 US value added, and how it affects the different parts of aggregate spending in the USA in 2018. (a) The purchase by Dell of a computer chip manufactured by Intel in China, which will be used to construct a desktop computer that is sold to a consumer in 2018. 5 points (b) The purchase in 2018, by a Seattle resident, of tickets to a performance of Hamilton in downtown Seattle in 2018. 5 points (c) The purchase in 2018 of 100 new Boeing 777 airplanes by Alaska Airlines, to use for flights to be made in 2019. 5 points.

Answer 1

a) If the purchase of a computer chip (manufactured in China) by Dell is used to construct a desktop computer, there is an increase in value addition since desktop computer is a final good. Also, this impacts the import. Moreover, when it is sold to a consumer in 2018, it affects the consumption or consumer part of the aggregate spending in USA in 2018.

b) The purchase in 2018, by a Seattle resident, of tickets to a performance of Hamilton is an example of a final service being consumed by a customer (in this case, a Seattle resident). Thus, it affects the consumption or consumer part of aggregate spending in USA in 2018.

c) The purchase in 2018 of 100 new Boeing 777 airplanes by Alaska Airlines is an example of investment being made by the firm. This would effect the investment part of aggregate spending in USA in 2018 but would not reflect increase in 2018 US value added.