Margret reports the following income for the last year 60 00

Margret reports the following income for the last year: $60 000 from employment, $1000 interest from bank accounts, and $20 000 profits and dividends. Of this income, she has spent $40 000 on food and other consumption goods, $10 000 on vacations abroad, saved $10 000 in her retirement account, spent $20 000 on purchasing extra shares and $10 000 on new computers for her business.

a)         What was the increase in GDP generated by Margret’s activity?

b)         What are her certain contributions to consumption, investment, and net exports?

c)         What is the value of production that was newly created by Margret’s productive activity?

Solution

a)

Increase in GDP = Employment+Interest+ Profits and dividends

=60,000 +1,000+20,000

=$ 81,000

b)

Constribution to consumption = 40,000

Investment = 10,000 (Investment in shares does not form the part of investment since it merely transfers rights)

Net Export = - 10,000

c)

Value of production newly created.

=Consumption expenditure + Investment (Computer)

=40,000 +10,000

=$50,000