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: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?
To find the Real GDP of the given economy in 2020 using the expenditure approach, we need to sum up the following components:
1. Consumption: There was an increase of 20 million dollars in consumption, so the consumption component is 250 million dollars (from 2019) + 20 million dollars = 270 million dollars.
2. Investment: There was a decrease of 5 million dollars in investment, so the investment component is 250 million dollars (from 2019) - 5 million dollars = 245 million dollars.
3. Government spending: There was an increase of 10 million dollars in government spending, so the government spending component is 250 million dollars (from 2019) + 10 million dollars = 260 million dollars.
4. Net exports: The value of all exports decreased by 5 million dollars, and the value of all imports increased by 15 million dollars. Therefore, the net exports component is -5 million dollars - 15 million dollars = -20 million dollars.
Now, we can calculate the Real GDP of the given economy in 2020 by adding up these components:
Real GDP = Consumption + Investment + Government Spending + Net Exports
Real GDP = 270 million dollars + 245 million dollars + 260 million dollars + (-20 million dollars)
Real GDP = 755 million dollars
Therefore, the Real GDP of the given economy in 2020 is 755 million dollars.