An economy recorded the following macroeconomic expenditure components during a fiscal yea… — JAMB UTME

An economy recorded the following macroeconomic expenditure components during a fiscal year: Personal Consumption Expenditure ( $C$ ) of $\$650$ million, Gross Private Domestic Investment ( $I$ ) of $\$220$ million, Government Purchase of Goods and Services ( $G$ ) of $\$310$ million, Exports ( $X$ ) of $\$140$ million, and Imports ( $M$ ) of $\$160$ million. Additionally, Net Factor Income from Abroad ( $NFIA$ ) was $\$25$ million. Calculate the Gross National Product at market price ( $GNP_{mp}$ ) of this economy in millions of dollars.

Answer: 1185 million dollars

Answer

The Gross National Product at market price (

GNP_{mp}

) of the economy is

1185

million dollars.

Using the expenditure method, Gross Domestic Product (

GDP_{mp}

) is calculated as

C + I + G + (X - M) = 650 + 220 + 310 + (140 - 160) = 1160

million dollars. Adding Net Factor Income from Abroad (

NFIA = 25

million dollars) yields the Gross National Product (

GNP_{mp} = 1160 + 25 = 1185

million dollars).

Step-by-Step Solution

Calculate Gross Domestic Product at market price (

GDP_{mp}

) using the expenditure approach formula:

GDP_{mp} = C + I + G + (X - M)

GDP_{mp} = 650 + 220 + 310 + (140 - 160) = 1160

million dollars.

The expenditure method sums private consumption, gross investment, government purchases, and net exports (

X - M

) to determine total domestic output.

Adjust

GDP_{mp}

by adding Net Factor Income from Abroad (

NFIA

) to derive Gross National Product at market price (

GNP_{mp}

GNP_{mp} = GDP_{mp} + NFIA

GNP_{mp} = 1160 + 25 = 1185

million dollars.

Gross National Product measures total income earned by residents of a nation, requiring the inclusion of net factor income earned from overseas.

Key Concept

Measurement of Gross National Product via Expenditure Approach

Estimated Time:1m 30s

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