Question

Consumers in a small economy spend $46,000 on goods and services annually. Also annually, investment is $9,000, government spending is $7,500, exports are $700, and imports are $100. What is the value of GDP in this economy?

Answer 1

To calculate the GDP of the small economy, we apply the formula GDP = Consumption + Investment + Government spending + (Exports - Imports), which yields a GDP value of $63,100.

Step-by-step explanation:

The student asked how to calculate the Gross Domestic Product (GDP) of a small economy with given economic indicators.

To find the value of GDP, we use the formula GDP = Consumption + Investment + Government spending + (Exports - Imports). Now, plugging in the values from the student's question: GDP = $46,000 (Consumption) + $9,000 (Investment) + $7,500 (Government spending) + ($700 (Exports) - $100 (Imports)). After performing the calculation, GDP = $46,000 + $9,000 + $7,500 + $600, which equals $63,100. This is the value of GDP in the given small economy.