Question

Suppose during the course of a year an economy produces $7 trillion of consumer goods, $1 trillion of investment goods, $5 trillion in government services, and has $1 trillion of exports and $2 trillion of imports. For that economy, GDP would be:
a. $10 trillion.b. $14 trillion.c. $8 trillion.d. $12 trillion.

Answer 1

Answer:

$12 trillion

Explanation:

GDP is the sum total of the wealth produced in a country over a given period of time, usually one year. GDP is calculated using the following formula: GDP = C + I + G + (X-M) where C = Consumption, I = Investments, G = Government Expenditure, (X-M) = Trade Balance, wich means exports minus imports.

Applying the exercise values in the formula, we have (in trillions):

GDP = 7 + 1 + 5 + (1-2) = 12

Therefore, GDP will be $ 12 trillion.