Question

EET 301: MACROECONOMIC THEORY
1. The following information was extracted from KNBS national account.

ITEMS                                                         FIGURES (KSH)
GNP                                                                            1890                                             
Capital consumption allowance                                197
Indirect business taxes                                              165
Business transfer payment                                           9
Net subsidies                                                                  2
Corporate profit                                                          140
Dividends                                                                      41
Corporate profit tax                                                      69
Net Interest                                                                  101
Contribution for social insurance                              139
Government transfer                                                   198
Personal Interest Income                                            148
Net business Savings (Retained earnings)                 30
Interest paid by government to people and business 42
Interest received by government                                   25
Interest paid by consumers to business                      30
Personal tax payment                                                   228
Personal savings                                                             67
Transfer to foreigners                                                      1
Net National Product                                                  1693

Required to compute
a) National Income
b) Personal Income
c) Disposable personal Income
d) Consumption Expenditure

      

Answer 1

a) National income= NNP - Indirect taxes+ subsidies =1693-165+2=1530

b) Personal income= National Income - Corporate tax - Retained earnings + Business transfer payments + Government transfer payments = 1530 -69 - 30 + 9 + 198 = 1638

c) Personal disposable income = Personal income - Personal taxes = 1638-228=1410

d) Consumption expenditure = Personal disposable income - Personal savings = 1410-67=1343.

Note: While calculating Consumption expenditure it is assumed that the government consumption expenditures are distributed as income of the individuals and is included in the personal income.