Question

Suppose the following are data for a given year from the annual Economic Report of the President. Calculate GDP using the Expenditure approach. Amount Corporate profits $ 305 Capital consumption allowance 479 Gross private domestic investment 716 Personal taxes 565 Personal saving 120 Government purchases 924 Imports 547 Net Interest 179 Rental Income 19 Exports 427 Personal consumption expenditures 2,966 Dividends 87 Indirect business taxes 370 Contributions for Social Security (FICA) 394 Transfer payments 543

Answer 1

4,486

Explanation:

The computation of GDP using the Expenditure approach is shown below:-

GDP using Expenditure Approach = Gross Private Domestic Investment + Govt. Purchases + (Exports - Imports) + Personal Consumption Expenditure

= 716 + 924 + (427 - 547) + 2966

= 4606 - 120

= 4,486

Therefore for computing the GDP using the Expenditure approach we simply applied the above formula.