Question

Use the following information to answer the following questions.

National income = $10,000 billion

Income receipts from rest of the world = $500 billion

Consumption of fixed capital = $1,500 billion

Income payments to rest of the world = $400 billion

Statistical discrepancy = $1 billion

A.) Compute the net national product.

B.) Compute the gross national product.

C.) Compute the gross domestic product.

Answer 1

Statistical discrepancy is the difference in estimates  of national income from income approach and product or expenditure approach. So it is included to national product to get national income.

Since taxes and subsidies are not given, so we assume that all these calculations are done at factor cost rather than market price.

A).Thus National Income = Net national Product (NNP) + Statistical discrepancy

Or Net National product ( NNP )= National Income - Statistical discrepancy

Net National product = $10000bn - $1bn = $ 9999bn

B). Now Gross National product (GNP) = Net National product (NNP) + depreciation( capital consumption )

  Gross National product (GNP) = $9999bn + $1,500 bn = $8499bn

Net factor income from abroad = Income receipts from rest of world minus income payments to rest of the world

NFIA = $500bn -$400bn = $100bn

C).Gross Domestic Product (GDP)= Gross National Product - Net factor Income from abroad

Gross Domestic Product (GDP) = $8499bn - $100bn = $8399bn