Question

. If during 2005, the country of Sildavia recorded investment spending for $3 billion, government purchases for $3 billion, consumer spending for $7 billion, imports for $5 billion, government transfers for $1 billion, and exports for $4 billion. Sildavia's GDP in 2005 was: A) $11 billion. B) $12 billion. C) $13 billion. D) $14 billion.

Answer 1

Answer:

The correct option is B,$12 billion

Explanation:

Using the formula for GDP given as Y = C + I + G + NX,the GDP of Sildavia is computed thus:

Y=GDP

C=Consumption of Household=$7 billion

G=Government expenditure=$3 billion

I=Investment=$3 billion

NX=Net exports(Exports-Imports)=($4-$5)=-$1 billion

Y=$7b+$3b+$3b-$1b

Y=$12 billion

The transfer does not feature in the GDP computation as it does not relate to any goods purchased