Question

The national accounts of Parchment Paradise are kept on​ (you guessed​ it) parchment. A fire in the statistics office destroys some​ accounts, leaving only the data on the right. Calculate GDP​ (expenditure approach) and depreciation.

Answer 1

Answer:

GDP [Expenditure Approach] is $7,040,  Depreciation is $920

Explanation:

The formula for calculating GDP [Expenditure Approach] is Consumption expenditure + Investment + Government expenditure + Exports − Imports

Mathematically,

Y = C + I + G +  (X − M)

Where C = $7,000, I = $160, G = $180, (X-M) = -$300

Y = 7000 + 160 + 180 - 300 = $7,040  

GDP [Expenditure Approach] is $7,040  

Depreciation = GDP - NDP

NDP = wages + profits + interest + rent + net factor income of unincorporated businesses

Where wages = $5,900, profits + interest + rent = $220, net factor income from abroad = $0

NDP = 5900 + 220 + 0 = $6,120

Applying Depreciation = GDP - NDP, we have:

Depreciation = 7040  - 6120 = $920

N.B: The depreciation is a measure of the statistical discrepancy between the GDP and NDP