Assume that Country A has a population of 500,000 and only produces one good: ca

Question

Assume that Country A has a population of 500,000 and only produces one good: cars. Country A produces 100,000 cars per year. The people in Country A purchase 90,000 cars, but there are not enough cars to fulfill all the demand. They decide to import 50,000 more. The government buys 25,000 cars for its police force, and 10,000 cars are bought by companies to transport employees to other locations to work. They also export 65,000 cars to nearby countries for sale. What is Country As GDP? What is the composition of GDP by percentage? What is the GDP per capita?How does this relate to Keynesian economics?

Explanation / Answer

GDP= C+I+G +(EX-IM)

= 90,000 + 25,000 + 10,000 + 65,000 - 50,000 = 140,000 cars

GDP per capita = 140,000 / 500 = 280 cars per person

It is related to Keynesian economics since it talks about the spending by the govt and its impact on economy.

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