Question

Issue 18/08/2017 We Prepare for Future Careers JUAL Revision Date 25/06/2018 Form No.ECTIACAITOS OU Group Work 1 Question 1: The table below gives some of the items in the U.S. National Income and Product Accounts in 2017. (6 marks) Item Wages 11,600 Consumption Expenditure 16,000 Indirect taxes 2,684 Interest, rent, and profit 6,000 Investments 4,400 Government Expenditure 4,000 Depreciation 5,316 Exports 2,400 Imports 1200 1. Given the above information, is this economy a net exporter or a net importer? (1 mark) 2. Calculate U.S. GDP in 2017 using the two approaches? (4 marks) 3. In May 2017, I sell my house which was constructed in 2010 for 1 million dollars. Does this transaction affect the GDP of 2017? Justify your answer (1mark) vice or an intermediate goo

Answer 1

1. Exports = $2,400

Imports = $1,200

Since the exports are more than imports, this particular economy is Exporting Economy. This economy is a net exporter.

2. Expenditure Approach

GDP as per Expenditure Approach = Consumption Expenditure + Investments + Government Expenditure + Exports - Imports = $16,000 + $4,400 + $4,000 + $2,400 - $1,200 = $25,600

Income Approach

GDP as per Income Approach = Wages + Indirect Taxes + Interest, Rent and Profit + Depreciation = $11,600 + $2,684 + $6,000 + $5,316 = $25,600

3. Buying and selling existing houses do not affect GDP in the same way. However, the accompanying costs of a house transaction still benefit the economy. Hence, selling a house in May 2017 did not affect the GDP of 2017.