Question

                                                                                                                                                Name____________________

Assignment. Points (10 points) Please neatly answer the following questions. Work must be shown to receive full credit.

Components	Trillions of $
Consumption	$10
Durable Goods	$3
Nondurable Goods	$4
Investment	$2
Services	$10
Government Purchases	$5
Structures	$1
Changes in Inventories	$1
Exports	$3
Imports	-$1
Income receipts from rest of the world	$2
Income receipts to rest of the world	$1
Depreciation	$3

1. According to the data above, calculate net exports. (answer 0.5 pt, work 2 pts)

2. With the data above, use both the demand side or supply side approach to calculate GDP for this economy. (answer 0.5 pt, work 2 pts)

3. Using the data above calculate Net National Product (NNP). (answer 0.5 pt, work 2 pts)

4. Now assume the GDP deflator during this given year is 112, calculate Real GDP. (answer 0.5 pt, work 2 pts)

Answer 1

Net Exports is the difference between exports and imports of a nations

Thus the formula for net exports is Net Exports = Exports-Imports = 3-(-1)= 4 (the imports should not have negative sign. Though it has a negative sign in the question, it has been dealt with accordingly. A positive sign on imports would have reduced net exports to 2 rather than increase to 4)

GDP = C+G+I + Net Exports

C-Consumption of households, G-Govt. Purchases, I- Gross Investment

GDP = 10+5+2+4 = $21 Trillions (Net exports value has been taken from above calculation whereas all other values have been given in the question itself)

Real GDP = 21*100/112 = $18.75 Trillions