Question

Larry is the sole owner of Larry’s Moving Company, Incorporated (LMC). In one year, LMC collects $2,000,000 from customers to help them move. LMC’s equipment depreciates in value by $200,000. LMC pays $1,400,000 to its workers, who pay $500,000 in taxes on this income. LMC pays $175,000 in corporate income taxes and pays Larry a dividend of 100,000. Larry pays taxes of $50,000 on this dividend income. LMC retains $125,000 of earnings in the business to finance future expansion. How much does this economic activity contribute to each of the following?

National Income = $

Answer 1

Answer: GDP (gross domestic product) the monetary value of finished goods and service provided within a country, for a particular year. (Also includes that is produced by foreign companies in country but excludes that is produced by country's citizens working overseas )

For the given economic activity,
GDP is $2,000,000 (service rendered to customer within country or consumption within country)

NNP (net national product) is value of finished goods and services produced by country (Includes that is produced by citizens overseas but excludes production by foreign companies) less depreciation.

NNP for above activity is $1,800,000 ($2,000,000 - $200,000)