Question

Suppose you are given the following data on incomes and expenditures for the economy of Westland,...

Suppose you are given the following data on incomes and expenditures for the economy of Westland, in current prices for factors incomes and outputs.

Consumption expenditures 2500

Employment income 2800

Government expenditure 800

Net indirect taxes 150

Exports 1200

Business income 700

Capital consumption allowance 200

Investment expenditure 600

Imports 1100

Investment income 150

(a) What is the value of the nominal GDP measured by expenditures?

(b) What is the net domestic income?

(c) What is the value of nominal GDP measured by the income approach?

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Answer #1

Solution

(a) Value of Nominal GDP by expenditure approach = Consumption + Govt.spending + Investment + Exports - Imports

=> 2500 + 800+600 + 1200 - 1100

=> 4000

(c) Value of Nominal GDP by the income approach

=National Income + Sales Tax+ Depreciation (or) capital consumption allowance + Net Factor Income

= (Employee Income +Rent+Interest +Profits) + Sales Tax+ Depreciation + Net Factor Income

=  (2800+ 150+700) + 150+200 => 4000

(b) Net Domestic Income = GDP - Depreciation

=> 4000 - 200 i.e., 3800

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