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 calculate the Real GDP of the economy in 2020 using the expenditure approach, we need to add the changes in the components of GDP to the Real GDP of 2019.
1. Consumption: Increase of 20 million dollars
2. Investment: Decrease of 5 million dollars
3. Government spending: Increase of 10 million dollars
4. Net exports (Exports - Imports): (-5) - 15 = -20 million dollars
Now, calculate the total change in GDP:
20 + (-5) + 10 - 20 = 5 million dollars
Finally, add this total change to the Real GDP of 2019:
250 million + 5 million = 255 million dollars
Therefore, the Real GDP of the given economy in 2020 is 255 million dollars.