To calculate the Real GDP for 2020 using the expenditure approach, we begin with the formula:
\[ \text{Real GDP} = C + I + G + (X - M) \]
Where:
- \( C \) = Consumption
- \( I \) = Investment
- \( G \) = Government Spending
- \( X \) = Exports
- \( M \) = Imports
We know the Real GDP in 2019 was 250 million dollars, so we will use this base and adjust it according to the changes for 2020:
-
Consumption increased by 20 million dollars: \[ C_{2020} = C_{2019} + 20 \]
-
Investment decreased by 5 million dollars: \[ I_{2020} = I_{2019} - 5 \]
-
Government Spending increased by 10 million dollars: \[ G_{2020} = G_{2019} + 10 \]
-
Exports decreased by 5 million dollars: \[ X_{2020} = X_{2019} - 5 \]
-
Imports increased by 15 million dollars: \[ M_{2020} = M_{2019} + 15 \]
Next, we can summarize these changes as follows (considering that \( C + I + G + (X - M) = 250 \) million for 2019):
Calculating the net change in Real GDP:
- Increase in Consumption: +20 million
- Decrease in Investment: -5 million
- Increase in Government Spending: +10 million
- Decrease in Exports: -5 million (X decreases)
- Increase in Imports: -15 million (M increases)
Now, we can summarize these overall changes:
\[ \text{Net change} = 20 - 5 + 10 - 5 - 15 \] \[ \text{Net change} = 20 - 5 + 10 - 5 - 15 = 5 \]
Adding this net change to the 2019 Real GDP:
\[ \text{Real GDP}_{2020} = 250 + 5 = 255 \text{ million dollars} \]
Therefore, the Real GDP of the economy in 2020 is 255 million dollars.
The correct response is:
255 million dollars