ECONOMICS (CBSE/UGC NET)

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ECONOMICS

AGGREGATE DEMAND

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
If consumption spending totals $40 million, investment is $30 million, tax revenue totals $15 million, government spending is $10 million, exports are $3 million and imports are $5 million, GDP is ____
A
$103 million
B
$80 million
C
$93 million
D
$78 million
Explanation: 

Detailed explanation-1: -One small change in the government’s activities will create a big change in the overall economy. The spending multiplier formula is calculated by dividing 1 by the MPS. It can also be calculated by dividing 1 by 1 minus MPC.

Detailed explanation-2: -Thus investment is everything that remains of total expenditure after consumption, government spending, and net exports are subtracted (i.e. I = GDP − C − G − NX ).

Detailed explanation-3: -In the question, GDP = $1, 000, Consumption = $600 and governmnet purchases = $200. Savings and investment = $1, 000 − $800 = $200. Need a fast expert’s response?

Detailed explanation-4: -GDP = C + G + I + NX. C = consumption or all private consumer spending within a country’s economy, including, durable goods (items with a lifespan greater than three years), non-durable goods (food & clothing), and services. More items •26-Nov-2022

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