Q1Assume the following accounts and amounts were reported by a nation last year: Government purchases of goods and services were $6.9 billion; personal consumption expenditures were $40.6 billion; gross private domestic investment amounted to $20 billion; personal savings were estimated at $2 billion; imports of goods and services amounted to $7.9 billion; and the exports of goods and services were $4 billion.
Answer to Q1(a)
GDP =[ C+I+G+E-I]
Where GDP = Gross Domestic Product , C= Consumption Expenditure , I = Investment Expenditure
G = Government Expenditure , E = Export , I = Import
NI = [ $40.6+$20+$2+$6.9+$4-$7.9]
= [ $73.5-7.9]
= $ 65.6
Hence the GDP of the country for the year is $ 65.6 million.
Answer 2 a]
Inflation Premium = 1+ Nominal Rate / 1+Real Rate -1
= 1+4/ 1+2.8 -1
= 5/3.8 -1 = 1.316-1 = 0.316
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