Question

# Based on the following data for a hypothetical economy.    Millions Wage and salaries Government Purchases Exports...

1. Based on the following data for a hypothetical economy.

Millions

 Wage and salaries Government Purchases Exports Rental Income Profit Interest Consumption and spending Imports Private investment Spending \$6000 \$2000 \$2650 \$450 \$1600 \$1000 \$4800 \$2400 \$2000
1. Expenditure approach:

1. Income approach:
1. Suppose that in the next year export decrease to 1650 million. Import increase to 3400 million and consumption falls to 2800 million. What will the GDP be in that year?

(1) Expenditure approach

GDP = Consumption + Investment + Government purchases + Export - Import

=> GDP = (\$4800 + \$2000 + \$2000 + \$2650 - \$2400) millions

=> GDP = \$9050 millions

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(2) Income approach:

GDP = Wages and salaries + rental income + profit + interest

=> GDP = (\$6000 + \$450 + \$1600 + \$1000) millions

=> GDP = \$9050 millions.

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(3) next year export decrease to 1650 million. Import increase to 3400 million and consumption falls to 2800 million.

GDP = Consumption + Investment + Government purchases + Export - Import

=> GDP = (\$2800 + \$2000 + \$2000 + \$1650 - \$3400) millions

=> GDP = \$5050 million

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