Question

Suppose that Consumption = $190 billion, Taxes = $60 b, Net Investment = $30 b, Depreciation = $50 b, Government Spending = $100 b, interest rate is 2.5%, Exports = $40 b, and Imports = $70 b. What does this country's Gross Domestic Product equal?

Select one:

a. $370 billion

b. $340 billion

c. $310 billion

e. $280 billion

Which of these is a reason why Real GDP per Capita is NOT a good measure of social welfare? Check all that apply.

Select one or more:

a. Real GDP per Capita does not account for longevity (how long people live)

b. Real GDP per Capita does not account for inflation

c. Real GDP per capita does not account for services (it only counts physical goods)

Suppose that Consumption = $200 billion, Gross Investment = $120 b, Depreciation = $80 b, Government Spending = $110 b, Exports = $80 b and Imports = $50 b. What does net investment equal as a percent of Gross Domestic Product?

Select one:

a. 8.7%

b. 9.8%

c. 11.2%

d. 14.4%

Answer 1

Consumption = $190 billion, Taxes = $60 b, Net Investment = $30 b, Depreciation = $50 b, Government Spending = $100 b, interest rate is 2.5%, Exports = $40 b, and Imports = $70 b

Gross investment = Net investment + Depreciation= 30 billion + 50 billion = $80 billion

Gross domestic product= Consumption + Gross investment+Government spending+exports-imports

Gross domestic product= 190 billion + 80 billion + 100 billion + 40 billion - 70 billion= $340 billion

Option b is the correct answer.

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Real GDP per capital is the value in terms of goods and services. We calculate real variables to get rid of limitation of nominal value that it is affected by the change in price. So to solve this, real GDP does take into account the inflation and it also include value of services.

Option:

a. Real GDP per Capita does not account for longevity (how long people live) is the correct answer

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Consumption = $200 billion, Gross Investment = $120 b, Depreciation = $80 b, Government Spending = $110 b, Exports = $80 b and Imports = $50 b

Net investment = Gross investment - depreciation= 120-80= $40 billion

Gross Domestic Product= Consumption + Gross investment+Government spending+exports-imports

Gross Domestic Product= 200+120+110+80-50= 460 billion

Net invesment % of GDP= (Net investment/GDP) x 100= (40/460) x 100= 8.7%

Option a is the correct answer