1. Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services:
ANSWER:
Airline ticket bought by a student - Intermediate good, consumption expenditure
New airplanes bought by Southwest Airlines - Final good, investment.
Cheese bought by Domino's - Intermediate good, consumption expenditure
The purchase of a new iPhone for the vice president - Final good, government expenditure on goods and services
New house bought by Bill Gates - Final good, investment.

2. Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: * Banking services bought by a student. * New cars bought by Hertz, the car rental firm. * Newsprint bought by USA Today . * The purchase of a new limo for the president. * New house bought by Al Gore.
ANSWER:
The student’s banking service is a final service and part of consumption expenditure.
Hertz’s new cars are additions to capital, so they are part of investment and final goods.
Newsprint is a component of the newspaper, so it is an immediate good.
The purchase of a new aircraft for the Vice-president is a final good and is part of government expenditure.
The new house is a final good and part of investment.

3. Aggregate Income = 9+2+3+0.7= 13.3
GDP= aggregate expenditure = aggregate income = 13.3

4. 1- GDP = Flow A = 13 trillion 5. 2- Government Expenditure = G = Flow C F.A = F.B + F.D + F.C + F.E 13 = 9.1 + 3.3 + FC – 0.8 FC = 1.4 6. Use the following data to calculate aggregate expenditure and imports of goods and services.
Government expenditure: $20 billion
Aggregate income: $100 billion
Consumption expenditure: $67 billion
Investment: $21 billion
Exports of goods and services: $30 billion
C(consumpt exp)=67 I(ivest)=21 G(gov exp)=20 Y(agreg income)=100
M(exports)=30

Y= C+I+G+(X-M)
100=67+21+20+(X-30)
X=22

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