Suppose that in the last year consumers spent $10 billion on durable goods, $40 billion on nondurable goods, and $35 billion on services. Consumption equals
The correct answer and explanation is:
The correct answer is $85 billion.
Explanation:
In this scenario, consumption refers to the total amount spent by consumers on goods and services within a year. The total consumption is the sum of spending on durable goods, nondurable goods, and services.
- Durable goods are products that last a long time, typically for several years. Examples include cars, appliances, and furniture. Consumers spent $10 billion on durable goods.
- Nondurable goods are items that are used up quickly or have a short lifespan. Examples include food, clothing, and gasoline. Consumers spent $40 billion on nondurable goods.
- Services are intangible goods that provide utility to consumers, such as healthcare, education, and entertainment. Consumers spent $35 billion on services.
To find the total consumption, we simply add up the expenditure in each category: Consumption=Durable goods+Nondurable goods+Services\text{Consumption} = \text{Durable goods} + \text{Nondurable goods} + \text{Services} Consumption=10 billion+40 billion+35 billion=85 billion\text{Consumption} = 10 \, \text{billion} + 40 \, \text{billion} + 35 \, \text{billion} = 85 \, \text{billion}
Thus, the total consumption is $85 billion. This represents the total value of goods and services that consumers have purchased over the year. This figure is often used in national income accounting to assess the overall economic activity and gauge the strength of consumer spending, which is a key driver of economic growth.