Question

Assume that a country has a closed economy that has only three goods/services. That is, there is no trade with other countries, so the economy has consumption, investment, and government spending, but no net exports. In a given year, the economy produces thirty haircuts that cost $10 each; two factory machines that cost $100 each; one highway repair that costs $500 13. What is total GDP for this economy? 14. What percent of GDP is consumption? ________________________________________ 15. What percent of GDP is investment? ____________________________ 16. What percent of GDP is government spending? _________________________________ Exclusions of GDP and an Examp

Answer 1

Explanation:

Given

Consumption = (10 x 30) = 300

Investment = (100 x 2) = 200

Government Spending = (500 x 1) =500

13. Total GDP for this economy = Consumption + Investment+ Government spending

=(10 x 30) + (100 x 2) + (500 x 1)

=$1000

14. Consumption % on GDP

= Consumption/ Total GDP x 100

=(300/1000) x 100

= 30%

15. Investment % in GDP

= Investment / Total GDP x 100

=(200/ 1000) x 100

=20%

16. Government spending % on GDP

=Government spending/ Total GDP x 100

=(500/1000) x 100

=50%