Answer on Macroeconomics Question for Sujan Prasad
Assuming there is investment in the preceding years of 40, the multiplicative effects of investment result in total output of 2364 of which 100 is kept aside for future years inventory & 200 as intermediate inputs. Raw material inputs to industries was 300 & the corporate losses are 200. Indirect taxes are 186 & wages are 500. How would this impact GDP??
So, GDP = GNE + Depreciation + Taxes + Transfer payments + (E - I) = 1140 +100 + 154 + 200 + (100 - 200) = 1494
In the second case GDP = 40 + (2364 - 100 - 200) - 200 + 186 + 500 = 2590
Raw materials are not included in the calculation.
So, GDP increased after the investment.
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