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    GDP and NDP by the expenditure and income methods

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    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.

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    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