Question

The following table provides the economic data for a country in a particular year. Based on the information, calculate the value of GDP Consumption expenditures $40 Imports $60 Government purchases of goods and services $20 Construction of new homes and apartments $30 4 Sales of existing homes and apartments $50 Exports $50 Government payments to retirees $20 Household purchases of durable goods $20 Beginning-of-year inventory $30 End-of-year inventory $20 Business fixed investment $40

Answer 1

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Answer
Value of GDP can be calculated using Expenditure method

GDP = consumption expenditure + Government expenditure +Investment + NET exports (X-M)

= 40 $ + 20 $ +(30+(30-20)+40   +( 50-60)
=40+20+80-10
=130 $

Change in inventories = 30$ - 20 $ = 10 $

Household purchases of durable goods is already included in Consumption expenditures
Sales of existing homes is not included in GDP to avoid double counting.
Government payments to retirees is not included in GDP as it is a transfer payment.