The table given below states the value of the GDP and the different components of aggregate expenditure for two years.
Table 10.1
$\begin{array}{|c|c|c|c|c|c|c|}
\hline & \text { GDP } & \boldsymbol{C} & \boldsymbol{I} & \mathbf{G} & \text { Export } & \text { Import } \
\hline \text { Year 1 } & - & \$ 750 & \$ 110 & \$ 60 & \$ 70 & \$ 50 \
\hline \text { Year 2 } & \$ 1,150 & \$ 930 & \$ 90 & \$ 75 & \$ 125 & - \
\hline
\end{array}$
-Refer to Table 10.1. If real GDP equals $1,000 in year 1, then:

Question

The table given below states the value of the GDP and the different components of aggregate expenditure for two years.
Table 10.1
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline & \text { GDP } & \boldsymbol{C} & \boldsymbol{I} & \mathbf{G} & \text { Export } & \text { Import } \
\hline \text { Year 1 } & - & \$ 750 & \$ 110 & \$ 60 & \$ 70 & \$ 50 \
\hline \text { Year 2 } & \$ 1,150 & \$ 930 & \$ 90 & \$ 75 & \$ 125 & - \
\hline
\end{array}$
-Refer to Table 10.1. If real GDP equals $1,000 in year 1, then:

Quizplus · Accepted Answer

Real GDP in year 1 is $1,000. The aggregate expenditure in year 1 is $1,040 ($750+$110+$60+$70-$50). As shown in the table, GDP in year 2 is $1,150. This represents an increase in nominal GDP from year 1 to year 2 of $400. Given that real GDP in year 1 equals $1,000, this means that the GDP deflator in year 2 is 1.15. To determine the level of unplanned inventory investment in year 1, we need to compare actual aggregate expenditure to planned expenditure. Planned expenditure is equal to the sum of consumption, investment, and government spending, which is $920 ($750+$110+$60). This means that unplanned inventory investment is $120 ($1,040-$920). Since imports are $50, this means that the level of unplanned inventory investment is $70. However, we know from the table that exports are $70. This means that any unplanned inventory investment is offset by export demand. Therefore, unplanned inventory investment is zero, and there is no change in inventories. 
Inventories do not increase by $60 or decrease by $100. In fact, we do not have enough information to determine if there was any change in inventories at all. 
Real GDP in year 1 is greater than aggregate expenditure, so option E is also incorrect.

The Table Given Below States the Value of the GDP