Question

Find out GDP at MP by
Expenditure Method if
• Gross Domestic Fixed Investment - 1500
• Increase in Inventory - 250
• Government Consumption Expenditure - 1250
• Export of Goods - 850
• Import of Goods - 1050
• Personal Disposable Income - 11,500
•Personal Saving- 1550​

Answer 1

Answer:

The Expenditure Approach: GDP Measured by Components of Demand

If we know that GDP is the measurement of everything that is produced, we should also ask the question, who buys all of this production? This demand can be divided into four main parts:

consumer expenditure (consumption)

investment expenditure

government expenditure on goods and services

net export expenditure

WHAT IS MEANT BY THE TERM “INVESTMENT”?

What do economists mean by investment, or investment expenditure? In calculating GDP, investment does not refer to the purchase of stocks and bonds or the trading of financial assets. It refers to the purchase of new capital goods, that is, business equipment, new commercial real estate (such as buildings, factories, and stores), residential housing construction, and inventories. Inventories that are produced this year are included in this year’s GDP—even if they have not yet sold. From the accountant’s perspective, it is as if the firm invested in its own inventories. Business investment in 2012 was over $2 trillion, according to the U.S. Bureau of Economic Analysis.

Table 1 shows how these four components of demand added up to the GDP in 2016.

Table 1. Components of U.S. GDP in 2016: From the Expenditure Side

Components of GDP (in trillions of dollars) Percentage of Total

C