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. This economy is a net exporter since exports (2400) are higher than imports (1200)

2. GDP as per income approach

GDP = Wages + Interest, Rent and profit + Depreciation + Indirect taxes = 11600+6000+5316+2684 = 25600

GDP as per expenditure approach

GDP = Consumption expenditure + Investments + Govt expenditure + Exports - Imports= 16000+4400+4000+2400-1200 = 25600

3. This transaction doesn't affect the GDP of 2017. Only investment as per economic definition, i.e., creation of assets that help produce goods, are included in GDP. This house was included in GDP in 2010, i.e., when it was constructed.