Question

he following table which provides data for an economy in a certain year:

Consumption expenditure	1000
Imports	600
Government purchases of goods and services	700
Construction of new homes and apartments	500
Sales of existing homes and apartments	600
Exports	500
Government payments to retirees	200
Household purchases of durable goods	300
Change in inventory	100

1. Calculate the value of investment spending                                        (3 x 2 marks = 6 marks)

2. What is the value of government spending                                            

3. What is the value of consumer spending   

4. What is the value of net exports spending                                            

5. Calculate the value of GDP according to the spending approach         

Answer 1

(a)

Calculate the value of investment spending -

Investment spending = Construction of new homes and apartments + Change in inventory

Investment spending = 500 + 100

Investment spending = 600

The value of investment spending is 600.

Calculate the value of government spending -

Government spending = Government purchases of goods and services

Government Spending = 700

The value of government spending is 700.

Calculate the value of consumer spending -

Consumer spending = Consumption expenditure

Consumer spending = 1,000

The value of consumption expenditure is 1,000.

Calculate the value of net exports spending -

Net exports = Exports - Imports

Net exports = 500 - 600

Net exports = -100

The value of net exports spending is -100.

Calculate the value of GDP -

GDP = Consumption expenditure + Government spending + Investment spendding + Net exports

GDP = 1,000 + 700 + 600 - 100

GDP = 2,200

The value of GDP according to the spending approach is 2,200.