An economy produces 1,000,000 computers valued at $2,000 each. Households purchase 200,000 computers, of which 100,000 are imported. Businesses purchase 300,000 domestically produced computers, the government purchases 300,000 domestically produced computers, and 100,000 domestically produced computers are sold abroad. The unsold computers at the end of the year are held in inventory by the computer manufacturers. What is the value of GDP?

Question

Quizplus · Accepted Answer

GDP = C + I + G + (X-M)
C = 200,000 (household consumption)
I = 300,000 (business investment) + 700,000 (unsold inventory)
G = 300,000 (government spending)
X-M = 100,000 (exports - imports)
GDP = 200,000(2,000) + 300,000(2,000) + 700,000(2,000) + 300,000(2,000) + 100,000(2,000) = $2.0 billion.

An Economy Produces 1,000,000 Computers Valued at $2,000 Each