Question

3. The lesson we learned from the circular flow model was the fact that the GDP can be measured in two equivalent ways: the expenditure approach and the incomes approach. Use the following data to answer the questions below.

National Income Accounts:

Net investment ​​​110​​Income earned but not received​​60

Depreciation​​​ 30​​Income received but not earned​​70

Exports​​​​ 50​​Personal income taxes​​​50

Imports​​​​ 30​​Employee Compensation​ 455

Government Purchases​​150​​Corporate profits​​ 60

Consumption​​​400​​Rental income 20

Indirect business taxes​​ 35 Net Interest 30

Proprietors’ income​​ 40​​Net earnings of U.S resources abroad 40

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a. Calculate the GDP using both approaches, and verifying that both approaches yield the same GDP value.

b. Calculate:

i) NNP =

ii) NI =

iii) PI =

iv) DI =

Answer 1