If consumption expenditures are $500,spending on fixed investment is $100,imports are $40,exports are $75,the capital consumption allowance is $25,government spending is $50,and inventories have fallen by $5,then GDP is
A)$25 greater than NDP.
B)$20 greater than NDP.
C)$50 greater than NDP.
D)the same as NDP.

Question

Quizplus · Accepted Answer

GDP is calculated as the sum of consumption expenditures, investment (including changes in inventories), government spending, and net exports (exports minus imports), plus the capital consumption allowance. Here, GDP = $500 (consumption) + $100 (investment) + $50 (government spending) + ($75 - $40) (net exports) - $5 (decrease in inventories) + $25 (capital consumption allowance) = $705. NDP is GDP minus the capital consumption allowance, so NDP = $705 - $25 = $680. Therefore, GDP is $25 greater than NDP.

If Consumption Expenditures Are $500,spending on Fixed Investment Is $100,imports