Question

In: Economics

Personal consumption expenditures $295 Net exports 11 Net foreign factor income 4 Dividends 16 Transfer payments...

Personal consumption expenditures $295

Net exports 11

Net foreign factor income 4

Dividends 16

Transfer payments 12

Compensation of employees 273

Rents 14

Taxes on production and imports 18

Statistical discrepancy 8

Undistributed corporate profits 21

Consumption of fixed capital (depreciation) 27

Personal taxes 26

Social Security contributions 20

Corporate income taxes 19

Interest 13

Corporate profits 56

Proprietors' income 43

Government purchases 82

Personal saving 30

Net private domestic investment 33

A. Using the above data, determine the GDP by both the expenditures and the income approaches. Then determind NDP.

B. Now determine NI in two ways: first, by making the required additions or subtractions from NDP (method 1); and second, by adding up the types of income and taxes that make up NI (method 2)

C. Adjust NI (from part B) as required to obtain PI.

D. Adjust PI (from part C) as required to obtain DI.

Solutions

Expert Solution

A
Expenditure approach: Income approach
GDP=WAGE+RENT+INTEREST+OWNERS' INCOME+CORPORATE PROFIT+ ADJUSTMENTS
Personal consumption expenditures $295 WAGE: Compensation of employees 273
Net private domestic investment 33 RENT: Rents 14
Consumption of fixed capital (depreciation) 27 INTEREST: Interest 13
Gross private domestic investment 60 OWNER'S INCOME Proprietors' income 43
Government purchases 82 CORPORATE PROFIT Corporate profits 56
Net export 11 ADJUSTMENTS: Indirect business taxes 18
Consumption of fixed capital (depreciation) 27
GDP=C+I+G+NX Net foreign factor income earned 4
Gross domestic product $448 Gross domestic product 448
NDP= GDP - Depreciation
$448 -27
421
B NI=NDP-Net foreign income earned in U.S.- Indirect tax
$421 - 4 - 18
399
both method will have same national income
Personal income:
C PI= NI - S.S. - Corporate income taxes - Undistributed corporate profit + Transfer payment
399-20-19-21+12
351
D Disposable Income

DI= PI - Personal tax

351 - 26
325

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