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 Gross private domestic investment Depreciation $1,700 $1,387 Exports $2,320 Imports $1,500 $3,921 Government purchases of goods and services Personal consumption expenditures Indirect business taxes and misc. items $5,700 $741 Income received from other countries $518 $422 $7,574 Income paid to other countries Compensation of employees (wages) Corporate profits Rental income Net interest Proprietors' income $1,295 $35 $303 $743 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

The GDP can be defined the market value of all goods and services which are produced in the domestic territory of the country in the current financial years.

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

=5700+1700+3921+2320-1500

=$12,141 billion

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

=7574+35+303+1295+743+1387+741

=$12,078 billion

Statistical discrepancy=12,141-12078

=$63 billion