Question

Below is a list of domestic output and national income figures for a given year. All figures are in billions. The questions thatfollow ask you to determine the major national income measures by both the expenditure and income methods. Theresults you obtain with the different methods should be the same.—-Personal consumption expendltures $245Net forelgn factor Income ‘ansfer paymentsRents 1- tatlstlcal dlscrepancy 8onsumptlon of fixed capltal (depreclatlon) Z- oclal security contrlbutlons 2 0Interest 13Proprletors’ Income 33Net exports 1DIvIdends 16ompensatlon of employees 223. es on productlon and Imports 18Undlstrlbuted corporate profitsPersonal taxes 26orporate Income taxes 19orporate profits 56overnment purchasesNet private domestic Investment 33Personal savlng 2—-as Using the above data, determine GDP by both the expenditures and the income approaches. Then determine NDP.b. Now determine NI in two ways: first, by making the required additions or subtractions from NDP; and second, by adding upthe types of income and taxes that make up NI.c. Adjust NI (from part b) as required to obtain Pl.d. Adjust Pl (from part c) as required to obtain DI.

Answer 1

Answer:

a. GDP=$388

NDP = $361

b. NI = $357

c. PI = $291

d. DI = $265

Explanation:

GDP and NDP by expenditure method

GDP = C + I gross + G + XnI = I net + depreciation = 33 + 27= 60GDP=245 +60 +72+11=388

GDP = 388

NDP +C + I net + G +XnNDP = 245+33+72 +11=361

NDP =361.

by income method

GDP=NI -NFIA+ statistical discount+ depreciation

GDP=357-4+8+27=388

NDP=GDP- depreciationNDP

=388-27=361

b.

NI by expenditure method

NI =NDP- stat.disc.+NFIA

=361-8+4

=357

By the income method

NI = wages+ rents+interest+profits+ tax,

But profit =corporate profit+ proprietors income profit=56+ 33=89NI

=223+14+13+89+18=357

C.

PI=NI -tax-social security-corporate income tax- undistributed corporate profit + transfer payments,

PI =357-18-20-19-21+12=291

d.

DI =PI - p tax =291-26=265