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Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment...

Question:

Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:

A. exports exceed imports by $50 billion

B. imports exceed exports by $50 billion

C. imports exceed exports by $150 billion

D. exports exceed imports by $150 billion

GDP and Expenditure Approach:

Gross domestic product (GDP) measures the total value of final goods and services produced for the market in an economy. The expenditure approach measures GDP as the sum of consumption, government expenditure, investment and net exports.

Answer and Explanation:

The answer is A.

According to the expenditure approach, GDP is calculated as follows:

  • GDP = consumption + investment + government spending + exports - imports
  • 1,200 = 690 + 200 + 260 + exports - imports (measured in billions)
  • exports - imports = 50

That is, exports is higher than imports by 50 billion.


Learn more about this topic:

Gross Domestic Product: Using the Income and Expenditure Approaches

from Economics 102: Macroeconomics

Chapter 4 / Lesson 2
30K

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