Question

A small country that uses the U.S. dollar as its currency is measuring its GDP for the current year. Personal consumption expenditure was $69,000 last year, and it increased by 10% this year. Gross private domestic investment was $18,000, and it decreased by 5% this year. Government purchases was $19,000, and it increased by 20% this year. Net exports of $2,000 remained the same as last year. What is the current year’s GDP based on the classic expenditure model?

Answer 1

Answer:

$117,800

Explanation:

GDP formula is:

GDP= Consumption (C)+ Investment (I)+ Government expenditure ()+ Net exports (exports-imports)

Last year, C= $69,000 and it increased 10% (100%+10%=110%),  

This year: C= $69,000*1.10= $75,900.

Last year: I= $18,000 and it decreased 5% (100%-5%=95%).

This year: I= $18,000*0,95= $17,100

Last year: G=$19,000 and it increased by 20% (100%+20%=120%)

This year: G= $ 19,000*1.20=$22,800

Last year: X-M= $2000 and it remained the same

This year: X-M= $2000

Current year´s GDP= $75,900+$17,100+$22,800+$2000= $117,800