Question

Suppose the economy is closed with national saving of $3 trillion, consumption of $10 trillion, and government purchases of $4 trillion. What is GDP?

Answer 1

Answer:

The correct answer is: $17 trillion.

Explanation:

The Gross Domestic Product or GDP represents the overall market value of all the goods and services a country produces and it measures the size of the economy. The GDP is determined with the following formula:

GDP = C +  G + I + NX

where:

• C: private consumption or consumer spending
• G: government spending
• I: businesses' capital spending
• NX: net exports (exports - imports)

In the example:

GDP = $3 trillion + $10 trillion + $4 trillion = $17 trillion