Given the following data for an economy,compute the value of GDP.
Consumption expenditures
1000
Imports
600
Government purchases of goods and services
700
Construction of new homes and apartments
500
Sales of existing homes and apartments
600
Exports
500
Government payments to retirees
200
Household purchases of durable goods
300
Beginning-of-year business inventory
500
End-of-year business inventory
600
Business fixed investment
300
A) 2,400.
B) 2,500.
C) 2,600.
D) 2,700.
E) 5,600.

Question

Quizplus · Accepted Answer

GDP (Y) = C + I + G + (X - M)
where,
C = Consumption expenditure = 1000
I = Gross investment = Construction of new homes and apartments (500) + Business fixed investment (300) + Change in inventories (End-of-year business inventory (600) - Beginning-of-year business inventory (500)) = 900
G = Government expenditure = Government purchases of goods and services (700) + Government payments to retirees (200) = 900
X = Exports = 500
M = Imports = 600

Substituting the values, we get:

Y = 1000 + 900 + 900 + (500-600) = 2,500

Therefore, the best answer is B) 2,500 – which represents the economy's GDP.

Given the Following Data for an Economy,compute the Value of GDP