To the right is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approaches. The results you obtain with the different methods should be the same.
Personal consumption expenditures $245
Net foreign factor income $4
Transfer payments $12
Statistical discrepancy $8
Consumption of fixed capital (depreciation) $27
Social Security contributions $20
Proprietors' income $33
Net exports $11
Compensation of employees $223
Taxes on production and imports $18
Undistributed corporate profits $21
Personal taxes $26
Corporate income taxes $19
Corporate profits $56
Government purchases $72
Net private domestic investment $33
Personal saving $20
a. Using the above data, determine GDP by both the expenditures and the incomes. Then determine NDP.
b. Now determine NI in two ways: first, by making the required additions or subtractions from NDP; and second, by adding up the types of incomes and taxes that make up NI.
c. Adjust NI (from part b) as required to obtain PI.
d. Adjust PI (from part c) as required to obtain DI.
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a. The expenditures approach:
GDP = Personal consumption expenditures
+ Net private domestic investment
+ Consumption of fixed capital, depreciation
+ Government purchases
+ net exports
= $245 + $27 + $33 + $72 + $11
The income approach:
GDP = compensation of ...
Calculation of Domestic Output and National Income items such as Gross Domestic Products (GDP), Personal Income (PI), Disposable Income (DI), Net Domestic Product (NDP) are provided.