Question

If nominal GDP is $800 billion and, on average, each dollar is spent four times in the economy over a year, then the quantity of money demanded for transactions purposes will be:

A. $200 billion
B. $400 billion
C. $800 billion
D. $3,200 billion

Answer 1

The dollar value of GDP can be calculated by summing up all the components of spending in the economy. In this case, the dollar value of GDP would be $3,030 billion.

Step-by-step explanation:

The dollar value of GDP can be calculated by summing up all the components of spending in the economy. In this case, we have export sales of $20 billion, government purchases of $1,000 billion, business investment of $50 billion, imports of $40 billion, and consumption spending of $2,000 billion. To calculate GDP, we need to subtract imports from the total spending (consumption spending + investment + government purchases + export sales). Therefore, the dollar value of GDP in this case would be:

GDP = Consumption spending + Investment + Government purchases + Export sales - Imports

GDP = $2,000 billion + $50 billion + $1,000 billion + $20 billion - $40 billion

GDP = $3,030 billion