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?
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Answer #1

(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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