Question

Smallville is a small nation. Its population total is 600, and it has 200 wage earners who earn an average of $75 per year. Each wage earner spends a total of $60 per year buying goods and services of which $7.00 goes to buying imported goods. The nation exports a total of $1300 worth of goods. The Government tax rate is 8% and all government money is spend on libraries. There is only one industry (fishing) and it employs every wage earner. The industry spends $900 each year on new fishing equipment. What is the GDP?

C=
I=
G=
X=
M=
GDP=

Answer 1

Answer: $22,100

Explanation:

Consumption

This is the amount spent by people on goods and services:

= 200 people * 60

= $12,000

Investment:

Total spent on new equipment: $900

Government spending:

This is derived from the taxes imposed on the country:

= 8% * 75 per worker * 200 workers

= $1,200

Exports = $1,300

Imports:

= 7 * 200 workers

= $1,400

GDP = Consumption + Investment + Government spending + Exports - Imports

= 12,000 + 900 + 1,200 + 1,300 - 1,400

= $22,100