Question

Given the following information answer the following questions: Personal Consumption Expenditures = 1000 Compensation to Employees...

Given the following information answer the following questions:

Personal Consumption Expenditures = 1000

Compensation to Employees = 900

Gross Domestic Private Investment = 300

Gross Business Fixed Investment = 250

Net Operating Surplus = 250

Government Purchases of Goods and Services = 330

Taxes on Imports and Production = 200

Net exports = -30

Consumption of Fixed capital=250

a) What is the value of GDP measured in terms of spending?

b) What is the value of GDP measure in terms of income (expenses)?

c) What is the value of Net Business Fixed Investment?

d) What is the value of the statistical discrepancy?

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Answer #1

a.

GDP=Personal Consumption Expenditures +Gross Domestic Private Investment+Gross Business Fixed Investment+Government Purchases of Goods and Services+NX

=1000+300+250+330+(-30)

=1850

b.

By Income method

GDP=Compensation to Employees+Net Operating Surplus +Consumption of Fixed capital+Taxes on Imports and Production

=900+250+250+200

=1600

c.

Net business investment=Gross Business Fixed Investment-Consumption of Fixed capital

=250-250

=$0

d.

Value of statistical discrepancy= GDP by expenditure method- GDP by income method

=1850-1600

=$250

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