# Phase 2 Individual Project Macro Econ, Witty

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Carla Blackwell Econ 210- Macroeconomics 4/20/15 Phase 2 IP Alan Witty Part 1 The basic formula for calculating the GDP is: Y = C + I + E + G. In this formula, the letter Y is your GDP. C indicates consumer spending. The letter I would symbolize the investment made by industry. The letter E is the excess of exports over imports, while the letter G indicates government spending. To calculate the GDP of a certain x then one would input numeric values in the place where the letters are in the formula. Part 1: Assume that Country A has a population of 500,000 and only produces 1 good: cars. Country A produces 100,000 cars per year. The people in Country A purchase 90,000 cars, but there are not enough cars to fulfill all the demand. They decide to import 50,000 more. The government buys 25,000 cars for its police force, and 10,000 cars are bought by companies to transport employees to other locations to work. They also export 65,000 cars to nearby countries for sale. Country A’s GDP can be found by calculating 90k + 25k + 10k + 65k – 50k = [140,000]. Once the GDP is determined the GDP Per Capita can also be solved for. To figure out the GDP per capita one must divide your GDP: 140,000 by the country’s population of 500,000 or [140,000/500,000=0.28]. The GDP Per Capita is 0.28. The composition of GDP by percentage is 28%. The way this relates to Keynesian economics: (the theory of the total spending of the economy) is due to its impact of increase in government spending in short run and long run. According to the U.S, Bureau of Economic Analysis: * What is the largest component of GDP? Consumption. (Household consumption) “Consumption is calculated by adding durable and non-durable goods and services expenditures. It is unaffected by the estimated value of imported goods.”(quickmba) * What is the smallest component of GDP? Net exports are the