Question

Place each of the following transactions in one of the four components of expenditure (consumption, investment, government expenditure, or net exports). Do not forget to briefly justify your answer: (a) A domestic airline manufacturer sells a new airplane to the Air Force (i.e. government) 12 points). b) A domestic car manufacturer sells a new car to a domestic soccer player (i.e. private individual) [2 points). (c) A domestic car manufacturer builds a car to be sold next year [2 points. (d) A domestic airline manufacturer sells a new airplane to a foreign airline operator [2 points). operator [2 points)

Answer 1

Given that Place each of the following transactions in one of the four components of expenditure. (a) As the airplane has been sold to the government, it will be part of the government expenditure. (b) It is sold to a domestic player and within the boundaries of the nation, So it will be part of the consumption. (C) car build to be sold next year will increase the inventory of the store and it will be part of the investment (d) As the plane has been sold to the foreign airline it will be part of net export. (e) A plane sold to the domestic airline operator will be part of its investment.