Answer:
a) C = £4000
I = £400
Y = £4400
b) New value of exported fishes = £2000
New value of imported clams = £500
C = £5500
I = £400
Y = £4400
c) C = £4000
I = £400
X = -£400
Y = £4000
Explanation:
Using the national spending approach.
Y = C + I + G + NX
Y = GDP
C = Consumer purchases
I = Investment purchases
G = Government purchases
NX = Total Exports - Total Imports
a) C = (2000 × 1) + (4000 × 0.5) = 2000 + 2000 = £4000 (the fishes and coconuts are consumer purchases)
I = (200 × 2) = £400 (the two huts he built are investment purchases)
G = 0 (no government purchase)
NX = X = 0 (no import or export)
Y = 4000 + 400 = £4400
b) He sells 500 fishes and gets 10000 clams. Clams are valued at 5 clams per pound.
New value of the exported fish = worth of the clams obtained in return for the fishes sold
5 clams = £1
10000 clams = (10000×1/5) = £2000
New value of the imported clams = worth of fishes exchanged for the clams
1 fish = £1
500 fishes = £500
C = (1500 × 1) + (4000 × 0.5) + (10000×0.2) = 1500 + 2000 + 2000 = £5500 (Number of local fish purchase reduces by 500, and the 10000 clams add to consumer purchases for the economy)
I = (200 × 2) = £400
G = 0
NX = £500 - £2000
Y = C + I + G + (X)
Y = 5500 + 400 + 0 + (-1500) = £4400
c) A tribe steals his newly produced huts and give him nothing in return
C = (2000 × 1) + (4000 × 0.5) = £4000
I = (200 × 2) = £400
G = 0
X = -(200 × 2) = -£400 (he gets nothing in return from the export of the houses)
Y = 4000 + 400 + 0 - 400 = £4000
Hope this Helps!!!
