If consumption expenditures are $100 million, net investment is $50 million, imports are $20 million, exports are $10 million, government spending on goods and services is $40 million, Social Security spending is $15 million, and sales of existing homes equals $40 million, then what is the measure of GDP?
A) GDP = $225 million
B) GDP = $180 million
C) GDP = $295 million
D) GDP = $195 million

Question

Quizplus · Accepted Answer

GDP is calculated as the sum of consumption expenditures, net investment, government spending, and net exports (exports minus imports). Thus, GDP = $100 million (consumption) + $50 million (net investment) + $40 million (government spending) + ($10 million - $20 million) (net exports) = $180 million. Social Security spending and sales of existing homes are not included in GDP.

If Consumption Expenditures Are $100 Million, Net Investment Is $50