Answer to Question #168914 in Microeconomics for Julie

Question

You are given the data below for 2008 for the imaginary country of Amagre, whose currency is the G.

• Consumption 350 billion G
• Transfer payments 100 billion G
• Investment 100 billion G
• Government purchases 200 billion G
• Exports 50 billion G
• Imports 150 billion G
• Bond purchases 200 billion G
• Earnings on foreign investments 75 billion G
• Foreign earnings on Amagre investment 25 billion G

1. Compute net foreign investment.
2. Compute net exports.
3. Compute GDP.
4. Compute GNP.

In addition to responding with a quantitative answer, briefly describe how you arrived at your answers.

Answer 1

a) Net foreign Investment=Bond purchases + Earnings on foreign investments.

=200+75=275 (billion G)

b) Net exports=Exports$-$Imports

=50$-$150= $-$100 (billion G)

c) GDP = C + I + E + G

=350+100+50-150+200=550 (billion G)

d) GDP=Gross domestic product

C = Consumer Spending

I = Investment made by industry

E = Excess of Exports over Imports

G = Government Spending

GNP= GDP + Net factor income from abroad

=550+75$-$25=600 (billion G)

Net factor income from abroad = income earned in foreign countries by the residents of a country $-$income earned by non-residents in that country.