Question

Assume that consumer spending increased by $4 billion while unsold business production aimed at consumers increased by $6 billion last year. As a result of these changes, GDP would A. increase by $2 billion. B. increase by $4 billion. C. increase by $10 billion. D. increase by $6 billion. E. decrease by $2 billion.

Answer 1

The correct option is;

B. Increase by $4 billion

Step-by-step explanation:

In Gross Domestic Product, (GDP) calculation based on the spending or expenditure approach, the spending components of the countries different economic groups are calculated

The formula for the GDP can be expressed as follows;

GDP = C + G + I + NX

Where;

C = Consumer spending or private sector consumption

G = Spending by the government

I = Economic investment

NX = Net export of goods by the economy.