Imagine following tiny nation.

It consist only of 100 people running a car manufacturing plant.

The nation imports every resource it needs for manufacturing those cars. It also imports all energy, gas for transportation, food for people, clothing etc from outside.

Because of high competition, the nation ends up selling all cars it produced in a particular year, at a much lower price than resources/energy/gas etc cost them. Hence, the manufacturing cost is greater than the total income from selling the cars.

Let's say the total income from all cars sold is 2 billions for a given year. The total cost for imported goods to run the manufacturing plant and feed/cloth the people was 3 billions.

They also have to pay 200 millions total in debt rates for that year from loans taken at some point.

a) What would be the GDP of such a nation for this particular year?

b) I have been told that the GDP cannot be negative so i assumed that expenses for the imports/debt rates are not included in computing the GDP, or can the GDP actually become negative?

c) Given you knew the GDP and the dept to GDP ratio of such a fictive nation. But you did not know the expenses for imports and also did not know the average interest rate this nation has to pay on it's debt, then would just knowing GDP and debt to GDP ratio of this nation allow you to make any estimates on the health of it's economy?

Ignore salaries of the workers. They just work for food and do not pay taxes. The car manufacturing plant is owned by the state

  • 4
    $\begingroup$ I'm voting to close this question as off-topic because this appears to be a homework question with no obvious work done. $\endgroup$
    – Lumi
    May 10 '15 at 16:49

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