Question

You have the following data from the US national accounts, the detailed question shows below:

3.2 You have the following data from the US national accounts: Consumption expenditure = 12.1 Government expenditure = Indirect tax = 1.2 Depreciation = 2.8 Investment = Net exports = -0.5 (a) Use the expenditure and income methods to Calculate GDP. Show work. (b) Find national income. Show work. (c) Between the two production factors, labor and capital, which one receives a larger share of national income in the US economy? Write down your approximate guess of how much is paid in wages and in interest (and other forms of income on capital) in the US. 3.0

Above figure is ALL the information and questions about this problem, no more other info.

The answer for each should be (a) 17.8, (b) 13.8 and (c) labor, 2/3 of national income. I am curious on how to calculate these (i.e. steps and reasons), thank you.

The answer shows above, so maybe it is very simple, how can I get that answer?

Answer 1

a) Expenditure method of GDPmp-----

Private consumption expenditure + govt expenditure+ Investment expenditure + Net export

12•+3•2+3•0+(-0•5) = 17•8

b)Calculation of National Income or NNPfc ( Net national Product at factor cost ------

NNPfc =GDPmp - depreciation - indirect taxes

17•8-2•8-1•2= 13•8

As all the three methods of calculating GDP and national income give the same answer, so answer will be same as per income method .( As enough information for income method is not given in question)

C) Between two production factors, labor and capital, labor receives larger share in US national income.

It is approximately 2/3 rd rd national income .The reason is , the amount of investment is very small in national income, so labor intensive economy is operating in US in the situation.