Answer to Question #69789 in Macroeconomics for usman

Question

An economy produces final goods and services with a market value of $5,000 billion in a given year, but only $4,500 billion worth of goods and services is sold to domestic or foreign buyers. Is this nation’ s GDP $5,000 billion or $4,500 billion? Explain your answer.

Answer 1

Since GDP is calculated using the GDP = C + G + I + (X-M) formula, it is $ 5,000 billion.
X = $ 4 500 billion - produced and purchased goods and services for foreign buyers, that is,
exported to other countries.
C = $ 500 billion - Consumers buy in this country.