Question

The table above shows aggregate statistical data for Country X in 2018. Assume the GDP deflator is 160.

Answer 1

Answer:

a) The nominal GDP in 2018 is $1600,000,000

b) Expenditures and income within the economy should balance

c) GDP deflator pertains to all produce goods and services while CPI deflator covers only  goods and services bought by consumers

d) The real GDP is $1,000,000,000

e) Increased by $65 million

Explanation:

a) The equation for finding the GDP is presented in the following equation;

GDP = Consumption + Investment + Government Spending + Net exports

That is;

GDP = C + I + G + (X - IM)

Therefore, the GDP = 1,000 + 400 + 300 - 100 = 1,600

Hence the nominal GDP in 2018 = $1,600,000,000

b) Here we have the income approach to GDP is premised on the fact that the economy expenditures should balance the income generated by the economic production of goods  and services within the economy.

c) The difference between CPI and GDP deflator is that GDP deflator takes into account the prices of services and goods produced while on the other hand, the CPI deflator accounting is based only on the prices of goods and services which customers bought.

d) Here we have;

$GDP \ delfator = \frac{Nominal \, GDP }{real \, GDP} \times 100$

Therefore, where, the GDP Deflator = 160 we have;

$160 = \frac{1600}{real \, GDP} \times 100$

Hence;

$real \, GDP = \frac{1600}{160} \times 100 = 1000$

The real GDP = $1,000,000,000

e) The GDP in the scenario will be calculated by the final goods approach such that the countries GDP will be calculated based on the final sales by the bakeries, that is an increase of $65 million.