Question

In the small island nation of Carribeau, there are three economic agents. One is a company that does the fishing: second is a restaurant that makes sushi; and lastly there is the government. The fishing company collects 10 tons of fisb million. The restaurant buys 8 tons of fish as noted before and has Ss0 million in revenue from selling sushi. The fish is the only cost and they pay $10 million for wages and $10 million for taxes. The government spends all its tax o the restaurant and 2 tons to customers at $3 million per ton, and pays wages of S10 million and taxes of $5 revenue on wages for its employees. Using the expenditure approach, what is the "consumption" of C+l+G+NX and what is the total GDP? a. C-$80 million; GDP-$115 million b. C-$56 million; GDP-$95 million c. C-$80 million; GDP-$95 million d. C-$56 million; GDP-$71 million

Answer 1

The expenditure approach will add up all the expenditure related to consumption investment government spending and net exports.

In this case consumers are purchasing Sushi worth 50 million dollar and fishes worth 6 million dollar. Therefore consumption expenditure is 56 million dollar.

Government is paying all the taxes in the form of wages which are total for 15 million dollar. There is no investment or net exports.

Hence the GDP for this nation is the sum of consumption and government expenditure which is therefore 71 million dollars

Select option d.