2. Using the relevant information below:**Gross Domestic Product (GDP)** Gross domestic product = consumption + investment + government purchases + net exports \[ GDP = C + I + G + (X - M) \]Calculate GDP using the expenditure approach.- Inventory investment: $50 billion- Fixed investment: $120 billion- Consumer durables: $420 billion- Consumer nondurables: $275 billion- Interest: $140 billion- Indirect business taxes: $45 billion- Government wages and salaries: $300 billion- Government purchases of goods and services: $110 billion- Imports: $80 billion- Exports: $40 billion- Profits: $320 billion- Services: $600 billion

Gross domestic product refers to the value of all final goods and services produced in an economy over a given period of time. There are three approaches to calculate the GDP; income approach, expenditure approach, and value-added approach. The income approach calculates GDP as the sum of payments made to the factors of production. The expenditure approach calculates GDP as the sum of all expenditures made in the economy. The value-added method calculates GDP as the sum of value added by each stages of production.The expenditure method calculated GDP as the sum of consumption expenditure, investment expenditure, government expenditure, and net exports. GDP=Consumption+Investment+Government spending+Net exports The consumption spending includes the consumer spending on durables and nondurables and services. The investment spending includes fixed investment and inventory investment. Government spending is the government's purchase of goods and services. Net exports are the exports in excess of imports. Therefore the GDP is calculated as, GDP=$420 billion+$275 billion+$600 billion+$50 billion+$120 billion+$110 billion+$40 billion-$80 billion=$1535 billion Therefore the GDP is $1535 billion.

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2. Using the relevant information below: Gross Domestic Product (GDP) gross domestic product = consumption + investment + government purchases + net exports GDP = C+I+ G + (X- M), calculate GDP using the expenditure approach. Inventory investment Fixed investment Consumer durables %3D $50 billion $120 billion $420 billion $275 billion Consumer nondurables Interest $140 billion Indirect business taxes $45 billion Government wages and salaries Government purchases of goods and services Imports Exports Profits Services $300 billion $110 billion $80 billion $40 billion $320 billion $600 billion

2. Using the relevant information below: Gross Domestic Product (GDP) gross domestic product = consumption + investment + government purchases + net exports GDP = C+I+ G + (X- M), calculate GDP using the expenditure approach. Inventory investment Fixed investment Consumer durables %3D $50 billion $120 billion $420 billion $275 billion Consumer nondurables Interest $140 billion Indirect business taxes $45 billion Government wages and salaries Government purchases of goods and services Imports Exports Profits Services $300 billion $110 billion $80 billion $40 billion $320 billion $600 billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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