In a hypothetical economy, the following expenditure arc incurred ;Gross domestic fixed capital formation 300 Personal consumption expenditure 250 250

 In a hypothetical economy, the following expenditure arc incurred

                                                                                                    GHS (million)

Gross domestic fixed capital formation                                                   300

Personal consumption expenditure                                                          250

Investment expenditure                                                                            230

Government expenditure                                                                          290

Value of physical increase in stock and work in                                      

progress                                                                                                       120

Export expenditure                                                                                    220

Imports of goods and services                                                                   225

Subsidies                                                                                                     60

Business taxes                                                                                           140

Net property income from abroad                                                          220

Personal income                                                                                        110

Electricity production                                                                              130

Depreciation                                                                                             200

Compute for the following

a. Total domestic expenditure at market prices

b. Total final expenditure at market price

c. Gross domestic expenditure at market price

d. Net national expenditure at market price

è. National income

f. The percentage of investment in GDP at market price 

g. Is the country Net exporter or Net Importer

 SOLUTION

a. Total domestic expenditure at market prices = Personal consumption expenditure + Investment expenditure + Government expenditure + Value of physical increase in stock and work in progress + Gross domestic fixed capital formation            

= 250 + 230 + 290 + 120+300

= 1,190 

b. Total final expenditure at market price = Total domestic expenditure at market prices +Export expenditure

= 1,190 + 220

= 1,410

c. Gross domestic expenditure at market price =  Personal consumption expenditure( C) + Investment expenditure( I) + Government expenditure (G) + Value of physical increase in stock and work in progress (I) + Gross domestic fixed capital formation (I) + Export expenditure (X) -Import  of goods and services (M)          

= 250+ 230 + 290 + 120 + 300 + 220 - 225

= 1,185

d. Net national expenditure at market price = Gross domestic expenditure at market price - Depreciation + Net Factor Income from abroad

= 1,185 - 200 + 220

= 1,205

e. National income ( NNP at factor cost) = Net national expenditure at market price - Business taxes +Subsidies

= 1205 -140 +60

= 1125

f. The percentage of investment in GDP at market price = (Total Investment / Gross domestic expenditure at market price) x 100

Total Investment = Gross domestic fixed capital formation +Investment expenditure  + Value of physical increase in stock and work in progress                                     

= ((300+230 120) / 1,185) x 100

=( 650/1,185) x 100

=54.9%

g. Net Export = Export expenditure - Imports of goods and services

    = 220 -225 

    =  -5

If a country's imports exceed its exports, it has a negative net export balance, which is often referred to as a trade deficit and also known as Net Importer.

    Net Import = Imports of goods and services -  Export expenditure

                       = 225 -220 

                       = 5

  therefore the country is a Net Import with a net import of 5