• 7-8 (Key Question) Below is a list of domestic output and national income figures for a given year. All figures are in billions. The ensuing questions ask you to determine the major national income measures by both the expenditure and income methods. Answers derived by each approach should be the same.
  • Personal consumption expenditures..............
    Net foreign factor income earned
    Transfer payments...........................
    Rents
    Consumption of fixed capital (depreciation).......
    Social security contributions
    Interest.......
    Proprietors’ income
    Net exports..........................................
    Dividends
    (part of corporate profits)
    Compensation of employees.............
    Indirect business taxes
    Undistributed corporate profits
    (part of profits)....
    Personal taxes
    Corporate income taxes
    (part of corporate profits)....
    Corporate profits
    Government purchases........
    Net private domestic investment
    Personal saving.......

    ....$245
    4
    ....12
    14
    ....27
    20
    ....13
    33
    .....11
    16
    ....223
    18
    ....21
    26
    ....19
    56
    ......72
    33
    .......20

    a. Using the above data, determine GDP and NDP by the expenditure method. also calculate National Income (NI) by the income method.

    ANSWERS:

    GDP = $388
    GDP = C + Igross + G + Xnet
    Igross = Inet + depreciation = 33 + 27 = 60
    GDP = 245 + 60 + 72 + 11 = 388

    NDP = $361
    NDP + C + Inet + G + Xnet
    NDP = 245 + 33 + 72 + 11 = 361
    NDP = GDP - depreciation
    NDP = 388 - 27 = 361

    NI = $339
    NI = wages + rents + interest + profits
    profits = corporate profits + proprietor's income
    profits = 56 + 33 = 89
    NI = 223 + 14 + 13 + 89 = 339