You are given the data below for the imaginary country of Amagre, whose currency is measured in G:

  • Consumption 350 billion G
  • Transfer payments 100 billion G
  • Investment 100 billion G
  • Government purchases 200 billion G
  • Exports 50 billion G
  • Imports 150 billion G
  • Bond purchases 200 billion G
  • Earnings on foreign investments 75 billion G
  • Foreign earnings on Amagre investment 25 billion G
  1. Compute net foreign investment.
  2. Compute net exports.
  3. Compute GDP.
  4. Compute GNP.

Expert Answers

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To calculate the net foreign investment of Amagre, one has to identify the amount of money that foreigners have invested in Amagre and then subtract the amount of money that Amagre has invested in other countries. Based on the wording, it looks like Amagre has received 75 billion G in foreign investment and has earned 25 billion G in their investments abroad. Subtract 25 billion G from 75 billion G, and the answer should be 50 billion G.

To compute net exports, you take the value of Amagre exports and subtract the value of Amagre imports. According to the wording of the data, the value of Amagre exports is 50 billion G, while the value of its imports is 150 billion G, so the answer should be -100.

To determine the GDP (gross domestic product) of Amagre, one will have to add together its net exports, consumption, government spending, and government investment. To get the answer, add 350 billion G, 100 billion G, 100 billion G, 200 billion G, 200 billion G, plus -100. The calculation should result in a GDP of 850 billion G.

To figure out the GNP (gross national product), take the GDP, add the income from foreign countries, then subtract the money that Amagre sends to other countries.

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