Question

Suppose in the year 2018, people spent $200 on durable goods, $200 on non-durable goods, and $100 on services. During the same year, the government paid $200 to soldiers and police officers, spent $100 building missiles and highways, spent $200 on welfare and unemployment benefits and $300 on social security payments. During this year the United States has imports totaling up to $500 while exporting $400 worth of goods and services. Finally, firms spent $200 on machines that will increase their productive capacity and they raised the amount of goods in their inventories from $400 at the beginning of the year to $500 at the end of the year. Please use this information to calculate total GDP for 2018a. $1,500b. $1,300c. $1,200d. $1,000

Answer 1

a. $1,500

Step-by-step explanation:

Gross Domestic Product = Consumption + Private Investment + Government Spending + Net Exports ( Exports - Imports)

Consumption: people spend 500 dollars

Private Investment Firm invest 200 planned and 100 unplanned total 300

Goverment spending 200 salaries + 100 goods + 500 welfare = 800

Net export: 400 export - 500 import = -100

GDP = 500 + 300 + 800 - 100 = 1,500

Answer 2

d. $1,000

Step-by-step explanation:

GDP = Consumption Expenditure + Domestic Private Investment + Government Expenditure + Net Exports ( Exports - Imports)

GDP = ( durable goods in 2018 + non- durable goods in 2018+ services in 2018) + ( Purchase of Machines + Change in inventories ) + ( Paid salaries of soldiers and police officers + expenditure on building missiles and highways) + Net exports ( Exports - imports )

GDP = ( $200 + $200 + $100 ) + ( $200 + ( $500 - $400 )) + ( $200 + $100 ) + ( $400 - $500 )

GDP = $1,000

Hence, the total GDP for 2018 is $1,000.