Chapter 6, Problem 1SCQ

Country A has export sales of $\$\text{2}0$ billion, government purchases of $\$\text{1},000$ billion, business investment is $\$\text{5}0$ billion, imports are $\$\text{4}0$ billion, and consumption spending is $\$\text{2},000$ billion. What is the dollar value of GDP?

To determine

The Gross Domestic Product (GDP) of country A.

Answer to Problem 1SCQ

GDP= $3030 bn.

Explanation of Solution

Given Information:

Given values in the question are

C= $2,000 bn

I = $50 bn

G= $ 1,000 bn

X= $20 bn

M= $40 bn

Calculation:

So, substituting these values in the equation for GDP, we get,

$\begin{array}{l}GDP=\$2000+\$50+\$1,000+(\$20-\$40)\\ =\$2,000+\$50+\$1,000-\$20\\ =\$3,030billion\end{array}$

Hence, The Gross Domestic Product (GDP) of country A is $3030 bn.

Economics Concept Introduction

Gross Domestic Product of a country: GDP of a country is the market value of all finished (final) goods and services produced in an economy during a particular year. It represents the economic well-being of a country as it is the aggregate income of that economy.

To define in terms of demand, GDP is the aggregate of all the expenditure by all economic units in an economy, namely, government purchases, private consumption expenditure, investment expenditure, expenditure on net exports(exports-imports), etc. The equation below defines GDP as the aggregate expenditure in the economy:

GDP = C + I + G + (X-M)

Where,

C = Consumption Expenditure

I= Business Investment Expenditure

G = Government Purchases

X = Exports

M= Imports