a What are the components of the expenditure approach to cal

(a) What are the components of the expenditure approach to calculating GDP? What is the proportion of the largest component in GDP?
(b) A farmer sells sheep to a processor for $2,000,000. The processor sells meat to the supermarkets for $3,000,000. The supermarkets sell meat to customers for $4,000,000. What is the contribution to GDP from the processor?
c) What does it mean when economists say that the economy is at full employment?

Solution

answer:

(a) Expenditure method is one of the most popular methods of calculating GDP of a country by adding all its economic expenditures during a year.

The components of the expenditure approach to calculating GDP are as follows:

The largest component of the GDP is consumption expenditure with approximately 70% proportion of the GDP.      

(b) The contribution to GDP from the processor is $1,000,000

Because the processor has done the value addition of $1,000,000 by taking meat from the sheep as he bought sheep for $2,000,000 and sell the meat of the sheep for $3,000,000.

(c) - When economists says that the economy is at full employment that means all the resources of the economy are being used efficiently. All the skilled and unskilled labour force who wants to work are getting job opportunities and there is only voluntary, structural etc. unemployment present in the economy.