Question

For a certain economy in 2005, GDP was $2,000; investment was $400; government purchases were $300; and net exports were $70. It follows that consumption was a $1,230. b $1,330. c $1,370. d 60 percent of GDP.

Answer 1

Answer:

a $1,230

Explanation:

The formula to compute the GDP is shown below:

GDP = Consumption + Investment + Government purchase + Net exports

$2,000 = Consumption + $400 + $300 + $70

$2,000 = Consumption + $770

So, the consumption would be equal to

= $2,000 - $770

= $1,230

Basically we applied the gross domestic product to find out the consumption.