Question

If one has data for the following categories: net interest, government spending, corporate profits, net exports, gross private domestic investment, rental income, and personal consumption expenditures, which measure of GDP can be calculated?
a) GDP using the expenditures approach

b) GDP using the income approach

c) GDP using both approaches

d) There is not enough information to calculate GDP using either approach.

Answer 1

Answer:

a) GDP using the expenditures approach

Explanation:

expenditures approach:

GDP = consumption + private investing + gevernemtn spending + net export

All the elements of the expenditures approach are present. Hence it is possible.

income approach:

GDP = interest + profit + rental income + wages

we aren't given with wages thus, we cannot determinate the national product with the income approach. Hence the gross domestic product is also impossible to calcualte using the income approach

Answer 2

Answer:

The correct answer is letter "A": GDP using the expenditures approach.

Explanation:

There are three main approaches to measure the Domestic Gross Product (GDP): the Expenditure Approach, the Income Approach, and the Added Value Approach. Using the Expenditure Approach to calculate the GDP implies:

GDP = C + I + G + N

Where:

• C = Personal Consumption Expenditures
• I = Gross Private Domestic Investment
• G = Government Consumption Expenditures and Gross Investment
• N = Net Exports (exports - imports)

Thus, with the information provided we could calculate the GDP using the Expenditure Approach.