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12 September, 03:50

The national accounts of Parchment Paradise are kept on (you guessed it) parchment. A fire in the statistics office destroys some accounts, leaving only the data on the right. Calculate GDP (expenditure approach) and depreciation.

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  1. 12 September, 05:43
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    GDP [Expenditure Approach] is $7,040, Depreciation is $920

    Explanation:

    The formula for calculating GDP [Expenditure Approach] is Consumption expenditure + Investment + Government expenditure + Exports - Imports

    Mathematically,

    Y = C + I + G + (X - M)

    Where C = $7,000, I = $160, G = $180, (X-M) = - $300

    Y = 7000 + 160 + 180 - 300 = $7,040

    GDP [Expenditure Approach] is $7,040

    Depreciation = GDP - NDP

    NDP = wages + profits + interest + rent + net factor income of unincorporated businesses

    Where wages = $5,900, profits + interest + rent = $220, net factor income from abroad = $0

    NDP = 5900 + 220 + 0 = $6,120

    Applying Depreciation = GDP - NDP, we have:

    Depreciation = 7040 - 6120 = $920

    N. B: The depreciation is a measure of the statistical discrepancy between the GDP and NDP
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