Assume that the total value of the following items is $600 billion in a specific

Question

Assume that the total value of the following items is $600 billion in a specific year for Upper Mongoose: net exports = $50 billion; value of new goods and services produced in the underground economy = $75 billion; personal consumption expenditures = $300 billion; value of the services of stay-at-home parents = $25 billion; gross domestic investment = $100 billion; government purchases = $50 billion. What is Upper Mongoose's GDP for the year? What is the size of the underground economy as a percentage of GDP? By what percentage would GDP be boosted if the value of the services of stay-at-home spouses were included in GDP?

Explanation / Answer

GDP = C + I + G + NET X

GDP = 300 + 100 + 50 + 50 = 500

Underground economy % of GDP = 75/500 = 15%

GDP % RISE DUE TO IN HOUSE = 25/500 = 5%

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