Question

The table below shows the national income accounts for a hypothetical economy, Metrica.

	($ billions)
Corporate income	103
Exports	73
Wages and salaries	562
Net international income to the rest of the world	8
Gross investment	157
Government purchases	184
Indirect taxes	75
Personal consumption	490
Imports	27
Depreciation	79
Proprietors' incomes and rents	56
Statistical discrepancy	?

a. The income-based estimate of Metrica's GDP is $  billion.

b. The expenditure-based estimate of Metrica's GDP is $  billion.

c. The value of the statistical discrepancy which is added to the lower estimate and subtracted from the higher estimate to find a single GDP value is $  billion.

d. Metrica's GDP is $  billion.

e. Metrica's capital stock  (Click to select)  contracted  expanded  by $  billion.

f. Metrica's GNI is $  billion. This means that income earned by the residents of other countries for their involvement in production in Metrica is  (Click to select)  less  greater  than income earned by residents of Metrica for their involvement in production in the rest of the world.

Answer 1

a. GDP = Compensation of employees + mixed income of self employed + operating surplus + depreciation + Net indirect taxes

= wages and salaries + proprietor’s income and rents + corporate income + Depreciation + Net Indirect Taxes (indirect taxes - subsidies)

= 562 + 56 + 103 + 79 + 75

= 875

b. GDP = Personal consumption Expenditure + Gross private Investment + Government Spending + Net Exports (Export - Import)

= 490+ 157 + 184 + 73 - 27

= 880

c. statistical discrepancy = GDP by expenditure method + Income method / 2

= 880 +875 / 2 = 877.5

Statistical discrepancy in GDP by expenditure method = 877.5 - 880 = -2.5

Statistical Discrepancy in GDP by income method = 877.5 - 875 = 2.5

d. Matrica GDP = 877.5 Billion $