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GDP and NDP by the expenditure and income methods

Chapter 24: Problem 4, a through d, on pages 503-504.
All figures are in billions; 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
Rents 14
Statistical discrepancy 8
Consumption of fixed capital (depreciation) 27
Social Security contributions 20
Interest 13
Proprietors' income 33
Net exports 11
Dividends 16
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 income approaches. 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 income 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.

Solution Preview

a. Using the above data, determine GDP and NDP by the expenditure method.

GDP by expenditures:
GDP = C + I + D + G + net exports
GDP = 245 + 33 + 27 + 72 + 11 = 388

NDP:
NDP = C + I + G + net exports
NDP = 245 + 33 + 72 + 11 = 361

or

NDP = GDP - depreciation
NDP = 388 - 27 = 361

b.
National ...

Solution Summary

GDP and NDP calculations by the expenditure and income methods; adjustments to find personal and disposable income

$2.19