In an open economy,gross domestic product equals $1,970 billion,government expenditure equals $300 billion,investment equals $500 billion,and net capital outflow equals $280 billion.What is consumption expenditure?
A)$280 billion
B)$780 billion
C)$890 billion
D)$1,170 billion

Question

Quizplus · Accepted Answer

In an open economy, the GDP formula is given by 
GDP = C + I + G + NX 
where C is consumption expenditure, I is investment, G is government expenditure, and NX is net exports (exports - imports) or equivalently, net capital outflow in this case.
Substituting the given values, we have 
$1,970 billion = C + $500 billion + $300 billion - $280 billion 
Solving for C, we get 
C = $1,970 billion - $500 billion - $300 billion + $280 billion 
C = $890 billion

In an Open Economy,gross Domestic Product Equals $1,970 Billion,government Expenditure