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?
(1 point)
Responses
235 million dollars
295 million dollars
270 million dollars
255 million dollars
To calculate the Real GDP of the given economy in 2020, we need to adjust the 2019 GDP using the changes in each component of the expenditure approach.
Increase in consumption: +20 million dollars
Decrease in investment: -5 million dollars
Increase in government spending: +10 million dollars
Decrease in exports: -5 million dollars
Increase in imports: +15 million dollars
Real GDP = 2019 GDP + (Increase in consumption - Decrease in investment + Increase in government spending + Decrease in exports - Increase in imports)
Real GDP = 250 million dollars + (20 million dollars - 5 million dollars + 10 million dollars - 5 million dollars - 15 million dollars)
Real GDP = 255 million dollars
Therefore, the Real GDP of the given economy in 2020 is 255 million dollars.