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Given the following annual information about a hypothetical country, answer questions a through d
Given the following annual information about a hypothetical country, answer questions a through d.
| Billions of Dollars | |
|---|---|
| Personal consumption expenditures | $200 |
| Personal taxes | 50 |
| Exports | 30 |
| Depreciation | 10 |
| Government purchases | 50 |
| Gross private domestic investment | 40 |
| Imports | 40 |
| Government transfer payments | 20 |
b. What is the value of net domestic product?
Expert Solution
Computation of Value of Net Domestic Product:
First we calculate Gross Domestic Product (GDP) using Expenditure Approach:
Gross Domestic Product (GDP) = Personal Consumption Expenditures + Gross Private Domestic Investment + Government Purchases + (Exports - Imports)
= $200 + $40 + $50 + ($30 - $40)
= $290 - $10
Gross Domestic Product (GDP) = $280 billions
Value of Net Domestic Product = GDP - Depreciation
= $280 - $10
Value of Net Domestic Product = $270 billions
So, Value of Net Domestic Product is $270 billions.
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