Using the expenditure approach, the Real GDP of a given economy was calculated as 250 million dollars in 2019. In 2020, the economy experienced the following:

Question

An increase of 20 million dollars in consumption.
A decrease of 5 million dollars in investment.
An increase of 10 million dollars in government spending.
The value of all exports decreased by 5 million dollars.
The value of all imports increased 15 million dollars.
What is the Real GDP of the given economy in 2020?

(1 point)
Responses

235 million dollars
235 million dollars

270 million dollars
270 million dollars

255 million dollars
255 million dollars

295 million dollars

Answer 1

To calculate the Real GDP for 2020 using the expenditure approach, we can use the formula:

\[ \text{Real GDP} = C + I + G + (X - M) \]

Where:

• \(C\) = Consumption
• \(I\) = Investment
• \(G\) = Government Spending
• \(X\) = Exports
• \(M\) = Imports

Starting with the Real GDP from 2019:

• Real GDP in 2019 = 250 million dollars

We will adjust each component based on the changes provided:

1. Consumption (C) increased by 20 million dollars:

   • New \(C = C_{2019} + 20\)

2. Investment (I) decreased by 5 million dollars:

   • New \(I = I_{2019} - 5\)

3. Government Spending (G) increased by 10 million dollars:

   • New \(G = G_{2019} + 10\)

4. Exports (X) decreased by 5 million dollars:

   • New \(X = X_{2019} - 5\)

5. Imports (M) increased by 15 million dollars:

   • New \(M = M_{2019} + 15\)

To simplify our calculations, we can express the 2020 Real GDP using the 2019 Real GDP and the changes:

\[ \text{Real GDP 2020} = 250 + 20 - 5 + 10 - 5 - 15 \]

Now calculate it step-by-step:

\[ \text{Real GDP 2020} = 250 + 20 - 5 + 10 - 5 - 15 \] \[ \text{Real GDP 2020} = 250 + 20 = 270 \] \[ \text{Real GDP 2020} = 270 - 5 = 265 \] \[ \text{Real GDP 2020} = 265 + 10 = 275 \] \[ \text{Real GDP 2020} = 275 - 5 = 270 \] \[ \text{Real GDP 2020} = 270 - 15 = 255 \]

Thus, the Real GDP of the given economy in 2020 is:

\[ \boxed{255 \text{ million dollars}} \]