Question

2. Using the following data, calculate GDP, GNP and NNP by both the expenditure approach and the income approach (dollars in billions).

Indirect Business Taxes:                                                           $217.5                   Net Exports:                     23.3

Personal Consumption Expenditures:                   1,672.8                   Corporate Profits:          180.7              

Gross Private Domestic Investment:                       395.3                  Interest Income:                           179.8 Government Purchases of Goods & Services:           534.7                  Proprietors’ Income:      130.6

Depreciation/Capital Consumption Allowance:    287.2                  Rents:                                 33.8

Wages & Salaries:                                                        1,596.5

Income Receipts from Rest of the World                   247.1

Income Payments to Rest of the World                      188.9

By the way, what is Net Investment for this economy?

Answer 1

EXPENDITURE APPROACH

GDP = Personal consumption expenditure + Gross private domestic investment + Government purchases of goods and services + Net exports

GDP = $1,672.8 billion + $395.3 billion + $534.7 billion + $23.3 billion

GDP = $2,626.1 billion

The GDP is $2,626.2 billion.

GNP = GDP + Income receipts from rest of the world - Income payments to the rest of the world

GNP = $2,626.1 billion + $247.1 billion - $188.9 billion

GNP = $2,684.3 billion

The GNP is $2,684.3 billion.

NNP = GNP - Depreciation

NNP = $2,684.3 billion - $287.2 billion

NNP = $2,397.1 billion

The NNP is $2,397.1 billion.

INCOME APPROACH

GDP = Corporate profits + Interest income + Rent + Wages and salaries + Proprietor's income + Indirect business taxes + Depreciation

GDP = $180.7 billion + $179.8 billion + $33.8 billion + $1,596.5 billion + $130.6 billion + $217.5 billion + $287.2 billion

GDP = $2,626.1 billion

The GDP is $2,626.2 billion.

GNP = GDP + Income receipts from rest of the world - Income payments to the rest of the world

GNP = $2,626.1 billion + $247.1 billion - $188.9 billion

GNP = $2,684.3 billion

The GNP is $2,684.3 billion.

NNP = GNP - Depreciation

NNP = $2,684.3 billion - $287.2 billion

NNP = $2,397.1 billion

The NNP is $2,397.1 billion.

Calculate Net investment -

Net investment = Gross Private Domestic Investment - Depreciation

Net investment = $395.3 billion - $287.2 billion

Net investment = $108.1 billion

The net investment is $108.1 billion.