Question

A.10,7000 Bil

B.12,400 Bil

C.12,300 Bil

D.11,900Bil

Saved Help Save & Table 5.3 National Income Accounts (dollar figures are in billions) Expenditures for consumer goods and services Exports Government purchases of goods and services Social Security taxes Net investment s RSS Indirect business taxes Imports Gross investment Corporate income taxes Personal income taxes Corporate retained earnings Net foreign factor income Government transfer payments to households Net interest payments to households $8,200 $1,700 $2,500 $1,900 $1,400 $1,400 $1,900 $1,800 $600 $1,500 $130 $100 $1600 $500 On the basis of Table 5.3, the value of the income aggregate that is defined as "the amount of output we could consume without reducing our stock of capital" (also known as the net domestic product) is

Please show me how you work this out.

Answer 1

Step 1

Calculate the depreciation -

Depreciation = Gross investment - Net investment

Depreciation = $1,800 billion - $1,400 billion

Depreciation = $400 billion

The depreciation is $400 billion.

Step 2

Calculate the gross domestic product (GDP) -

GDP = Expenditures for consumer goods and services + Government purchases of goods and services + Gross investment + Exports - Imports

GDP = $8,200 billion + $2,500 billion + $1,800 billion + $1,700 billion - $1,900 billion

GDP = $12,300 billion

The gross domestic product is $12,300 billion.

Step 3

Calculate the net domestic product (NDP) -

NDP = GDP - Depreciation

NDP = $12,300 billion - $400 billion

NDP = $11,900 billion

Thus,

The Net Domestic Product is $11,900 billion.

Hence, the correct answer is the option (D).