Question

8. The income approach The following table shows macroeconomic data for a hypothetical country. All figures are in billions of dollars. Billions of Dollars $2,300 Gross private domestic investment Depreciation Exports $1,987 $3,120 $200 $4,521 Imports Government purchases of goods and services Personal consumption expenditures Indirect business taxes and misc. items Income received from other countries $6,300 $1,341 $1,118 $1,022 $8,174 $1,895 Income paid to other countries Compensation of employees (wages) Corporate profits Rental income Net interest Proprietors' income $365 $903 $1,343 If you calculate GDP by adding together the final demands of consumers, business firms, the government, and foreigners (i.e., using the expenditure approach), GDP for this economy is $ billion. Given this information, the statistical discrepancy between national income and net national product, obtained when GDP is measured using the expenditure approach, is $ billion.

Answer 1

GDP by expenditure method=C+I+G+X-M

=6300+2300+4521+3120-200

=$16,041 billions

GDP at MP by income method= wages+ rent+ interest+ Corporate profit+ Proprietor income+ Depreciation+ indirect business tax

=8174+365+903+1895+1343+1987+1341

=$16,008 billions

Statistical discrepancy= GDP by expenditure method - GDP by income method

=16,008-16041

=$33 billions