Table 1 shows selected components of gross domestic product in Arvania in 2022 and 2023. Component 2022 ($bn) 2023 ($bn) Consumer spending 210 218 Investmen...
Question 1 Report
Table 1 shows selected components of gross domestic product in Arvania in 2022 and 2023.
| Component | 2022 ($bn) | 2023 ($bn) |
|---|---|---|
| Consumer spending | 210 | 218 |
| Investment | 64 | 70 |
| Government spending | 82 | 86 |
| Exports | 51 | 55 |
| Imports | 57 | 63 |
(a) Calculate GDP in 2023 using GDP = C + I + G + X - M. [2]
(b) State whether Arvania's trade balance improved or worsened between 2022 and 2023. [1]
(c) Explain one way increased government spending could increase economic growth. [1]
Answer Details
(a) Use \(GDP=C+I+G+X-M\):
\[218+70+86+55-63=366\]
Arvania's GDP in 2023 was \($366\text{ bn}\). [2]
(b) The trade balance worsened. In 2022, \(51-57=-6\), a \($6\text{ bn}\) deficit; in 2023, \(55-63=-8\), a \($8\text{ bn}\) deficit. [1]
(c) Higher government spending raises aggregate demand for goods and services. Firms may increase output, causing real GDP and economic growth to increase. [1]
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