In a given fiscal year, the national accounts of a nation reveal the following expenditure… — JAMB UTME

In a given fiscal year, the national accounts of a nation reveal the following expenditure figures: Personal consumption spending ( $C$ ) is $\$400$ billion, gross private domestic investment ( $I$ ) is $\$150$ billion, government expenditures ( $G$ ) total $\$120$ billion, exports ( $X$ ) stand at $\$80$ billion, and imports ( $M$ ) are $\$50$ billion. Calculate the Gross Domestic Product (GDP) of the nation in billions of dollars using the expenditure approach.

Answer: 700 billion dollars

Answer

The Gross Domestic Product (GDP) of the nation calculated using the expenditure approach is $700 billion.

The expenditure approach determines GDP by combining aggregate spending components:

GDP = C + I + G + (X - M)

. Substituting the given values yields:

GDP = 400 + 150 + 120 + (80 - 50) = 700

billion dollars.

Step-by-Step Solution

Identify the formula for calculating Gross Domestic Product (GDP) via the expenditure approach

GDP = C + I + G + (X - M)

The expenditure method sums all final expenditures on goods and services within an economy.

Calculate net exports by subtracting imports (M) from exports (X)

Net Exports =

80 billion -

50 billion = $30 billion

Imports represent expenditures on foreign-produced goods and must be subtracted to isolate domestic output.

Add consumption spending (C), investment (I), government spending (G), and net exports (X - M)

GDP =

400 billion +

150 billion +

120 billion +

30 billion = $700 billion

Combining total spending across all macroeconomic sectors yields the aggregate Gross Domestic Product.

Key Concept

Expenditure Method of Measuring GDP

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