Question

Consumption                                       $5000 (in billion)

Gross Investment                                1000

Indirect business taxes                            300

Retained earning                                     244

Corporate taxes                                       100

Social securities taxes                             800

Government purchases                        1500

Export                                                                 500

Transfer payments                               1000

Net interest                                             500

Net foreign factor income                           4

Capital consumption allowance              800

Import                                                     100

            Personal income tax                                200

1. Calculate GDP from the above figures:

2. Calculate net investment from the above figures:

3. Calculate net domestic product (NDP) from the above figures:

4. Calculate national income from the above figures:

Answer 1

1. GDP

GDP stands for gross domestic product, which shows the total expenditure of the all four sectors of the economy.

GDP = Consumption + Gross investment + Government purchase + Net export.

Net export = Export - Import = $500 - $100 = $400

GDP = $5000 + $1000 + $1500 + $400 = $7900.

2. Net investment

Net investment is the investment which left after deducting depreciation from gross investment.

Net investment = Gross investment - Capital Consumption allowance

Net investment = $1000 - $800 = $200.

3. Net domestic product (NDP)

Net domestic product is calculated by deducting depreciation from the gross domestic product.

NDP = GDP - Capital Consumption allowance

NDP = $7900 - $800 = $7100.

4. National income

National Income shows the total income of the nation, It is calculated by deducting indirect tax from the net national product. While the net national product is the sum of net domestic product and net foreign factor income.

National income = GDP + Net foreign factor income - Capital consumption allowance - Indirect business tax.

National income = $7900 + $4 - $800 - $300 = $6804