In an open economy, gross domestic product equals $1,950 billion, government expenditure equals $280 billion, investment equals $500, and net capital outflow equals $280 billion. What is consumption expenditure?

Question

Quizplus · Accepted Answer

In an open economy, the equation for GDP is: 
GDP = C + I + G + NX 
where NX = exports – imports = net exports 
Given: GDP = $1,950 billion, G = $280 billion, I = $500 billion, and NX = -$280 billion. 
Substituting the values, we get: 
$1,950 billion = C + $500 billion + $280 billion - $280 billion 
$1,950 billion = C + $500 billion 
Therefore, 
C = $1,950 billion - $500 billion 
C = $1,450 billion 
So, consumption expenditure is $890 billion (Option C).

In an Open Economy, Gross Domestic Product Equals $1,950 Billion