Question

The table below shows the national income accounts for a hypothetical economy, Metrica. ($ billions) Corporate...

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.

Homework Answers

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 $

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