Question

Consider the following hypothetical data for the U.S. economy in $2020$(all amounts are in trillions of dollars).

a. Based on the data, what is GDP? NDP? NI?

b. Suppose that in $2021$, exports fall to $\backslash (2.3$trillion, imports rise to $\backslash )2.85$trillion, and gross private domestic investment falls to $\$3.25$trillion. What will GDP be in $2021$, assuming that other values do not change between $2020$and $2021$?

Short answer

Option a is

As a result, $GDP=\$18.6$trillion, $NDP=\$17.3$trillion, and$NI=\$16.5$trillion are the values.

Option b is

As a result, the final GDP number is$\$17.7$trillion.

Step-by-step solution

    Explanation of option a

The expenditure approach to GDP calculation adds up consumption, gross private investment, government purchases, and net exports. Add these numbers together to get the current value of GDP:

$$\begin{gathered} GDP=C+I+G+NX \\ =11+3.8+4+2.5-2.7 \\ =18.6 \end{gathered}$$

Step 2:      Difference between GDP and depreciation

NDP is the difference between GDP and depreciation

$$\begin{gathered} NDP=GDP-Depreciation \\ =18.6-1.3 \\ =17.3 \end{gathered}$$

The national income for this section is NDP minus indirect taxes, which equals . As a result,$GDP=\$18.6$trillion, $NDP=\$17.3$trillion, and$NI=\$16.5$trillion are the values.

    Explanation of option b

b) In 2019, the GDP number will be:

$$\begin{gathered} GDP=C+I+G+NX \\ =11+3.25+4+2.3-2.85 \\ =17.7 \end{gathered}$$

As a result, the final GDP number is $\$17.7$trillion.