Question

2. Given the following information: Social Security Contributions = $1100 Government Purchases = $7100 Personal Taxes = $1900 Net Foreign Factor Income = $1200 Imports = $3700 Wages = $3800 Rent = $1300 Dividends = $1000 Transfer Payments = $700 Interest = $2200 Corporate Profits = $3200 Personal Consumption Expenditures = $8200 Depreciation = $2100 Taxes on Production and Imports = $1400 Exports = $2500 Gross Private Domestic Investment = $1400 Proprietor's Income = $1800 Corporate Income Taxes = $1300 Statistical Discrepancy = $900 Undistributed Corporate Profits = $900 Population = 500 a. Using the expenditures approach, solve for GDP. b. Using the income approach, solve for national income, net domestic product, and GDP. c. Solve for personal income and disposable income. d. Solve for GDP per capita. nf GDP and

Answer 1

Ans 2) Methods of Measuring National Income are:-

1.Product Method/Output method /Production method

2.Income Method

3.Expenditure Method

Let us solve the question of part a: calculating GDP by expenditure method

While using the expenditures approach to calculating GDP the components are consumption, investment, government spending, export, and import. So from the above-given information GDP would be.

GDP = GOVERNMENT PURCHASE+PERSONAL CONSUMPTION + GROSS PRIVATE DOMESTIC INVESTMENT+ EXPORT- IMPORT

= $7100 +    $8200 +   $1400 + $2500 - $3700

= $15500

Let us solve part b : Using income method solve for national income, net domestic product and GDP.

Under the Income Method, the National Income is calculated by compiling income of all the factors of production.

GDP = Total Wage + Total rent + Total Inerest + Total Profit.

= (Wages + proprieter's income ) + Rent + Interest + Corporate profit + Statistical Discrepancy

= ( $3800+ $1800) + $1300 + $2200 +$3200 + $900

  = $13200

NDP = GDP - Depreciation

= $13200-$2100

= $11100

Net National Product at market price (NNP at MP) = NDP + Net foreign factor income

= $11100 + $1200

= $12300

National Income = NNP at factor price = NNP at mp - indirect taxes + subsidies

= $12300 - indirect taxes(taxes on production and import )+(subsidies=0)

= $12300- $1400

= $10900

Now solve part C : determination of personal income and disposble income

PI = NI - Undistributed profit - net interest payment paid by household - corporate tax + transfer payment by govt and household

= 10900 -900-1300+700+1100= 10500

now solve part d) per capita GDP = GDP by expenditure method/ Population

= $15500/500

= $31