Question

Problem #1 GDP calculated by the expenditure approach will b income approach, because OA. the dollar value of the expenditure on new goods and services in a year must be equal to he GDP calculated by the the dollar value of the income generated in that year the dollar value of the expenditure on new goods and services in a year is always less than the dollar value of the income generated in that year, since imports are subtracted from the expenditure value. OB· OC. the national income and the gross domestic product are two different measurements. OD. of net business transfer payments, indirect taxes minus subsidies and surplus of government enterpises Problem #2: Imports are subtracted in the expenditure approach to calculating GDP, because OA. consumption, investment, and govemment spending are understated as these include OB consumption, investment and govenment spending are overstated as these include expenditures on both domestic and forcign goods. expenditures on both domestic and foreign goods OC. U.S. has a negative balance of trade. OD the U.S. economy is not open to foreign trade Problem #3: What component of GDP (C. L G, NX), if any, would cach of the following transactions affect? Explain A. Aunt Aisha buys a new house. B. You buy a pizza from Herfy in Faisaliya C. Honda expands its factory in Jaddah D. A family buys a new refrigerator E. Hafr Al Batin repaves the Riyadh Highway Problem #4: The following data on capital stock (plant, equipment, housing and inventory) are available for the Republic of Capika for the year of 2015 Stock of capital on January 1, 2005: $12,000 billion. Stock of capital on December 31, 200S: S12 900 billion. From this one can conclude that in 2005, the level of net investment- S

Answer 1

Ans:

1) Option A

The dollar value of the expenditure on new goods and services in a year must be equal to the dollar value of the income generated in that year.

GDP is the market value of final goods and services produced by a country during a specific period of time. GDP is calculated using expenditure approach,income approach and value added approach. Since GDP is the market value of final goods and services produced by a country during a year, the dollar value of the expenditure on new goods and services in a year must be equal to the dollar value of the income generated in that year.

2) Option B

consumption, investment and government spending are overstated as these include expenditure on both domestic and foreign goods.

GDP is the market value of final goods and services produced by a country during a specific period of time. GDP under expenditure approach = consumption + investment + government spending + exports - imports. Imports are subtracted in the expenditure approach to calculating GDP because consumption, investment and government spending include expenditure on both domestic and foreign goods.