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If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are –$1,910, then government purchases are:

Question

If GDP (measured in billions of current dollars) is 5,465,consumptionis5,465, consumption is 3,657, investment is 741,andnetexportsare741, and net exports are –1,910, then government purchases are:

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Solution

The Gross Domestic Product (GDP) of a country is the sum of consumption, investment, government purchases, and net exports. This relationship can be expressed by the following formula:

GDP = Consumption + Investment + Government Purchases + Net Exports

We can rearrange this formula to solve for government purchases:

Government Purchases = GDP - Consumption - Investment - Net Exports

Substituting the given values into this formula:

Government Purchases = 5,4655,465 - 3,657 - 741(741 - (-1,910) Government Purchases = 5,4655,465 - 3,657 - 741+741 + 1,910 Government Purchases = $2,977

So, government purchases are $2,977 billion.

This problem has been solved

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