3. The components that comprise a nation\'s gross domestic prod¬ uct were identi

Question

3. The components that comprise a nation's gross domestic prod¬
uct were identified and discussed in this chapter. Assume the follow¬
ing accounts and amounts were reported by a nation last year:
government expenditures (purchases of goods and services) were
$5.5 billion; personal consumption expenditures were $40.5 billion;
gross private domestic investment amounted to $20 billion; capital
consumption allowances were $4 billion; personal savings were esti¬
mated at $2 billion; imports of goods and services amounted to $6.5
billion; and exports of goods and services were $5 billion.
a. Determine the nation's gross domestic product.
b. How would your answer change if the dollar amounts of
imports and exports were reversed?

Explanation / Answer

GDP= PCE + GE + GPDI + NE Where GDP = gross domestic product; PCE = personal consumption expenditures, GE = government expenditures, GPDI = gross private domestic investment, and NE = net exports of goods and services. So 40.5+5.5+20+(5-6.5)=64.5B if they were reversed: 40.5+5.5+20+(6.5-5)=67.5B

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