Question

(Expenditure Approach to GDP) Given the following annual information about a hypothetical country, answer questions a through d. Billions of Dollars Personal consumption expenditures $200 Personal taxes 50 Exports 30 Depreciation 10 Government purchases 50 Gross private domestic investment 40 Imports 40 Government transfer payments 20 What is the value of GDP? What is the value of net domestic product? What is the value of net investment? What is the value of net exports?

Answer 1

What is the value of GDP?

GDP = C + I + G + NX (X-N)

GDP = $200 + $40 + $50 + NX ($30 - $40)

GDP = $200 + $40 + $50 - $10

GDP = $280

What is the value of net domestic product?

NDP = GDP - Depreciation

NDP = $280 - $10

NDP = $270

What is the value of net investment?

The formula is the same as net domestic product, so the value of net investment is also $270

What is the value of net exports?

The value of net exports, as seen above, is -$10 (because the value of imports is higher than the value of exports).