Question

If GDP measured in billions of current dollars is $7,465, consumption is $3,555, investment is $740, and net exports are –$910, then government purchases are:

a. $2,160.
b. $4,080.
c. $3,980.
d. $2,260.

Answer 1

The government purchases are calculated using the GDP formula, resulting in $4,080 billion based on the provided economic data. The correct answer is option b $4,080

Step-by-step explanation:

To calculate government purchases, we use the formula for Gross Domestic Product (GDP): GDP = Consumption + Investment + Government Purchases + (Exports – Imports). Given that GDP measured in billions of current dollars is $7,465, consumption is $3,555, investment is $740, and net exports are (exports minus imports) –$910, we can calculate government purchases as follows:

GDP = Consumption + Investment + Government Purchases + (Exports – Imports)

$7,465 = $3,555 + $740 + Government Purchases – $910

After rearranging and solving for Government Purchases, we find that:

Government Purchases = $7,465 - $3,555 - $740 + $910

Government Purchases = $4,080

Therefore, the government purchases are $4,080 billion.