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Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approaches.

Personal consumption expenditures $295
Net foreign factor income 4
Transfer payments 12
Rents 14
Statistical discrepancy 8
Consumption of fixed capital (depreciation) 27
Social security contributions 20
Interest 13
Proprietors' income 33
Net exports 11
Dividends 16
Compensation of employees 273
Taxes on production and imports 18
Undistributed corporate profits 21
Personal taxes 26
Corporate income taxes 19
Corporate profits 56
Government purchases 72
Net private domestic investment 33
Personal saving 20

Required:
a. Using the above data, determine GDP by both the expenditure and the income approaches and then determine NDP.
b. Now determine NI: first, by making the required additions and subtractions from GDP (Method 1), and second, by adding up the types of income and taxes that make up NI (Method 2).
c. Adjust National Income (from part b) as required to obtain PI.
d. Adjust PI (from part c) as required to obtain DI.


Sagot :

Answer:

1. Expenditure approach

Gross domestic product = Personal consumption expenditures + Net private domestic investment + Consumption of fixed capital (depreciation) + Government purchases + Net export

Gross domestic product = $295 + $60 + 72 + $11

Gross domestic product = $438

Income approach

Gross domestic product = Compensation of employees + Rents + Interest + Proprietors' income + Corporate profits + Indirect business taxes + Consumption of fixed capital (depreciation) + Net foreign factor income earned

Gross domestic product = $273 + $14 + $13 + $33 +  $56 + $18 + $27 + $4

Gross domestic product = $438

NDP = GDP - Depreciation

NDP = $438 - $27

NDP = $411

b. NI = NDP - Net foreign income earned in U.S. - Indirect tax

NI = $411 - $4 - $18

NI = $389

So, both method will have same national income

c. Personal income = NI - S.S. - Corporate income taxes - Undistributed corporate profit + Transfer payment

Personal income = $389 - $20 - $19 - $21 + $12

Personal income = $341

d.  Disposable Income = PI - Personal tax

Disposable Income = $341 - $26

Disposable Income = $315