Question

If during 2011. the country of Sildavia recorded a GDP of $65 billion. interest paymentsof $15 billiorn imports of $13 billion. profits of $7 billion. exports of $15 billion. andrent of $7 billion. wages during 2011 in Sildavia were:A) $38 billion.B) 836 billion.C) 851 billion.D) 864 billion.

Answer 1

Answer:

B. $36 billion

Explanation:

Since we were asked to calculate Wages. We can't use the Expenditure method of GDP. Method to be used would be the Income approach. In doing so, the values of export and import would be excluded. Therefore,

Given that

GDP = 65 billion

Profits = 7 billion

Rent = 7 billion

Interest payments = 15 billion

Recall that,

GDP = sum of income earned (profits, wages, rents, interests)

Thus,

Wages = GDP - Profits + rents + interests

= 65 - (15 + 7 + 7)

= 65 - 29

= 36 billion

Hence, wages during 2011 was $36 BILLION.

Note: Parameters used are based on the information in the question. It is important to note that income earned when using income approach could be more than the 4 stated parameters of wages, rent, profits and interests.