Question

# Below is a list of domestic output and national income figures for a certain year. All...

Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approaches. The results you obtain with the different methods should be the same.

Category Value Category Value
Personal Consumption Expenditures \$295 Net Exports 11
Net Foreign Factor Income 4 Dividends 16
Transfer Payments 12 Compensation of Employees 273
Rents 14 Taxes on Production and Imports 18
Statistical Discrepancy 8 Undistributed Corporate Profits 21
Consumption of fixed capital (depreciation) 27 Personal Taxes 26
Social Security Contributions 20 Corporate Income Taxes 19
Interest 13 Corporate Profits 56
Proprietors' Income 43 Government Purchases 82
Personal Saving 30 Net Private Domestic Investments 33

a. Using the above data, determine GDP by both the expenditures and the income approaches. Then determine NDP.

GDP using the Expenditures Approach = _______ billion

GDP using the Income Approach = _______ billion

NDP = _______ billion

b. Now determine NI in two ways: first, by making the required additions or subtractions from NDP (method 1); and second, by adding up the types of income and taxes that makeup NI (method 2).

Method 1 = ______ billion

Method 2 = ______ billion

c. Adjust NI (from part b) as required to obtain PI.

PI = ______ billion

d. Adjust PI (from part c) as required to obtain DI.

DI = ______ billion

a)

GDP(Expenditure Approach) = personal consumption + ( net private domestic investment + Depreciation ) + Govt. purchases + net exports

= 295 + 33 + 27 + 11+ 82 = 448

GDP(Income Approach) =compensation of employees + interest + rents + corporate profits + propreitors income + taxes on prodction and imports + depreciation + statistical discrepancy - net foreign factor income

= 273 + 13 + 14 + 56 + 43 + 18 + 27 + + 8 - 4

= 448

NDP = GDP - Depreciation (consumption of fixed capital)

= 448 - 27 = 421

b)

NI ( 1st Method ) = NDP + net foriegn factor income - statistical discrepancy

= 421 + 4 - 8

= 417

NI ( 2nd Method ) = Rents + wages(compensation of employees) + propreitors income + interest + taxes on production and imports + corporate profits

= 14 + 273 + 43 + 13 + 18 + 56

= 417

c)

PI = NI + transfer payments - social security contribution - taxes on production and imports - undistributed corporate profits - corporate income taxes

= 417 + 12 - 20 - 18 - 21 - 19

= 351

d)

DI = PI - personal taxes

= 351 - 26 = 325

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