The table given below reports the value of real GDP and its components consumption (C), investment (I), exports, and imports for two consecutive years.
Table 10.3
$\begin{array}{l}
\begin{array}{|c|c|c|c|c|c|}
\hline & \text { Equilibrium } & & & & \
\hline & \text { Real GDP } & \text { C } & \text { I } & \text { Exports } & \text { Imports } \
\hline \text { Year 1 } & \$ 9,350 & \$ 7,500 & \$ 1,350 & \$ 1,800 & - \
\hline \text { Year 2 } & \$ 11,450 & \$ 8,900 & - & \$ 2,350 & \$ 1,600 \
\hline
\end{array}\
\text { Assume that government spending is zero for this economy. }
\end{array}$
-Refer to Table 10.3. The equilibrium value of imports in year 1 is:

Question

The table given below reports the value of real GDP and its components consumption (C), investment (I), exports, and imports for two consecutive years.
Table 10.3
 $\begin{array}{l}
\begin{array}{|c|c|c|c|c|c|}
\hline & \text { Equilibrium } & & & & \
\hline & \text { Real GDP } & \text { C } & \text { I } & \text { Exports } & \text { Imports } \
\hline \text { Year 1 } & \$ 9,350 & \$ 7,500 & \$ 1,350 & \$ 1,800 & - \
\hline \text { Year 2 } & \$ 11,450 & \$ 8,900 & - & \$ 2,350 & \$ 1,600 \
\hline
\end{array}\
\text { Assume that government spending is zero for this economy. }
\end{array}$
-Refer to Table 10.3. The equilibrium value of imports in year 1 is:

Quizplus · Accepted Answer

The equation for GDP in a closed economy is:

GDP = C + I + G

where G = government spending. Since it is given that G (government spending) is zero for this economy, the equation simplifies to:

GDP = C + I

In year 1, real GDP is $9,350 and C + I = $7,500 + $1,350 = $8,850. Therefore, the value of imports must be the difference between GDP and C + I:

Imports = GDP - C - I = $9,350 - $7,500 - $1,350 = $500

However, this is not one of the answer choices. This is because the table only reports the value of exports and imports for each year, and not the change in these values from the previous year. Therefore, in order to find the value of imports in year 1, we must use the information from year 2.

In year 2, real GDP is $11,450 and exports are $2,350. This means that the total value of goods and services produced in the economy that are not exported is:

GDP - Exports = $11,450 - $2,350 = $9,100

This includes both consumption and investment (since government spending is zero). Therefore, in year 1, the value of consumption and investment that is not spent on imports is:

$9,100 - Import Value in Year 2 = $7,500 + $0 = $7,500

Solving for the import value in year 2, we get:

Import Value in Year 2 = $1,600

Since the question asks for the equilibrium value of imports in year 1, we assume that this value is unchanged from year 2. Therefore, the answer is D) $1,300.

The Table Given Below Reports the Value of Real GDP