If you calculate GDP by adding together the final demands of consumers, business firms, the government, and foreigners (i.e., using the expenditureapproach), GDP for this economy is $billion. Given this information, the statistical discrepancy between national income and netnational product, obtained when GDP is measured using the expenditure approach, is $billion. The following table shows macroeconomic data for a hypothetical country. All figures are in billions of dollars.Billions of DollarsGross private domestic investment$2,200Depreciation$1,887Exports$2,820Imports$300Government purchases of goods and services$4,421Personal consumption expenditures$6,200Indirect business taxes and misc. items$1,241Income received from other countries$1,018Income paid to other countries$922Compensation of employees (wages)$8,074Corporate profits$1,795Rental income$265Net interest$803Proprietors' income$1,243

Answered: If you calculate GDP by adding together…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If you calculate GDP by adding together the final demands of consumers, business firms, the government, and foreigners (i.e., using the expenditure
approach), GDP for this economy is $
billion. Given this information, the statistical discrepancy between national income and net
national product, obtained when GDP is measured using the expenditure approach, is $
billion.

The following table shows macroeconomic data for a hypothetical country. All figures are in billions of dollars.
Billions of Dollars
Gross private domestic investment
$2,200
Depreciation
$1,887
Exports
$2,820
Imports
$300
Government purchases of goods and services
$4,421
Personal consumption expenditures
$6,200
Indirect business taxes and misc. items
$1,241
Income received from other countries
$1,018
Income paid to other countries
$922
Compensation of employees (wages)
$8,074
Corporate profits
$1,795
Rental income
$265
Net interest
$803
Proprietors' income
$1,243

Expert Solution

Step 1

The term ‘GDP’ or gross domestic product refers to the market value of all services and commodities manufactured within the domestic territory of a nation. It measures a country’s performance in a particular fiscal year. In expenditure approach, it is the sum of expenditure by all sectors of the economy. The expression of GDP under expenditure method is,

GDP = C + I + G + (X – M)

where, consumption (C) expenditure = $ 6,200

Domestic investment (I) expenditure = $ 2,200

Government (G) purchase = $ 4,421

Exports (X) = $ 2,820

Imports (M) = $ 300

= $ [6200 + 2200 + 4,421 + (2,820 – 300)]

= $ 15341 billion

The value of GDP measured using expenditure approach is $ 15341 billion.

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