Question

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                                                                                                                                                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)

  1. 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)

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

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

Homework Answers

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

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