# Understanding GDP Calculation: An ExerciseThe following table shows the data for a hypothetical economy in a specific year. All figures are in billions of dollars.| Category | Value ||-----------------------------------|-----------------|| Personal consumption expenditures | $80 billion || Purchases of stocks and bonds | $30 billion || Net exports | -$10 billion || Government purchases | $30 billion || Sales of secondhand items | $8 billion || Gross investment | $25 billion |### Instructions: Enter your answer as a whole number.**Question:**What is the country’s GDP for the year?**Answer Format:**_______ billion## Explanation of GDP CalculationTo calculate the GDP (Gross Domestic Product) of a country, we use the expenditure approach, which includes the following components:1. **Personal consumption expenditures (C)**: The total value of all goods and services consumed by households.2. **Investment (I)**: This includes gross investment, which is used in the calculation. Purchases of stocks and bonds are not included in GDP as they are considered financial transactions.3. **Government purchases (G)**: The total government expenditure on goods and services.4. **Net exports (NX)**: Exports minus imports. A negative value indicates that imports are greater than exports.### Components to Include:- **Personal consumption expenditures**: $80 billion- **Gross investment**: $25 billion- **Government purchases**: $30 billion- **Net exports (exports - imports)**: -$10 billion### Components to Exclude:- **Purchases of stocks and bonds**- **Sales of secondhand items**### GDP CalculationGiven the data, the GDP can be calculated using the following formula:\[ \text{GDP} = C + I + G + NX \]Substituting the provided values:\[ \text{GDP} = 80 + 25 + 30 - 10 \]\[ \text{GDP} = 125 \]Hence, the country’s GDP for the year is:**125 billion**

Formula: Note: Second hand goods are not counted as they do not add to production. Purchase of…

The following table shows the data for a hypothetical economy in a specific year. All figures are in billions of dollars. Category Value Personal consumption expenditures $80 Purchases of stocks and bonds 30 Net exports -10 Government purchases 30 Sales of secondhand items Gross investment 25 Instructions: Enter your answer as a whole number. What is the country's GDP for the year? billion

The following table shows the data for a hypothetical economy in a specific year. All figures are in billions of dollars. Category Value Personal consumption expenditures $80 Purchases of stocks and bonds 30 Net exports -10 Government purchases 30 Sales of secondhand items Gross investment 25 Instructions: Enter your answer as a whole number. What is the country's GDP for the year? 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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