If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.

Question

BlackTom AI · Accepted Answer

We start by identifying the components of GDP using the expenditure approach: GDP = C + I + G + (X - M).

Option A: False
- If someone chose False, they would be asserting that GDP is not 5700. To evaluate this, we compute using the given values: Consumption (C) = 4000, Investment (I) = 800, Government purchases (G) = 1000, Exports (X) = 300, Imports (M) = 400. Net exports (X - M) = 300 - 400 = -100. Summing these: 4000 + 800 + 1000 + (-100) = 5700. Since the calculation yields 5700, the statement that GDP is not 5700 would be incorrect because it contradicts the arithmetic.

Option B: True
- Here, we verify that GDP equals 5700 using the same components. The net export contribution is negative due to higher imports than exports, specifically -100. Adding all components: 4000 (C) + 800 (I) + 1000 (G) + (-100) (X - M) = 5700. This confirms the GDP value given is correct. The result aligns with the standard GDP formula as applied to the provided numbers.

Common pitfalls to watch for include forgetting to subtract imports (confusing them with exports), or omitting the net exports term altogether. Another frequent error is misplacing the signs for X and M or miscomputing the sum of components. By carefully calculating net exports as exports minus imports and then aggregating all spending components, the final GDP value 5700 emerges clearly.

Overall, the computation demonstrates that the statement 'GDP is $5700' is true, given the standard expenditure approach and the provided data.

If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.

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