Question

Given the figures provided, calculate the GDP using the expenditure approach only. Not all figures might be included in the calculation at all. Show your work.

a) National income = 1,000

b) consumption = 3,000

c) net private domestic investment = 1,500

d) government purchases = 2,000

e) exports = 500

f) transfer payments by government = 400

g) imports = 800 depreciation = 500

h) corporate income = 1,000

Answer 1

1. The expenditures approach : Y = C + I + G + (X – M), says GDP = consumption + investment + government expenditure + exports – imports.
The components of U.S. GDP identified as “Y” in equation form, include Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M).
The National Income is considered in expenditure approach after deduction of Depreciation & Net Indirect Taxes
NDP = 1000-500, So NDP = 500
	National Income (NDP)				500
	Consumption				3000
	Private Domestic Investment				1500
	Government Purchases				2000
	Exports				500
					7500
	import				800
	GDP				6700
Special Note :Corporate net income & transfer payments need to be ignored for the expenditure method.