Consider the national income accounting data provided in the following table: Item Billions of Dollars...

Consider the national income accounting data provided in the following table:

Item Billions of Dollars

Gross private domestic investment $45

Personal Taxes 30

Proprietor Income 50

Transfer Payments 20

Indirect business taxes 15

Corporate income taxes 10

Government expenditures 39

Consumption of fixed capital (depreciation) 10

U.S. exports 20

Compensation to Employees (wages) 175

Dividends 15

Corporate Ret. Earnings (Undistributed Profits) 5

Net foreign factor income earned in U.S. 3

Rental Income 25

Social security contributions 5

U.S. Imports 15

Interest Income 35

Statistical Discrepancies 2

i) Calculate the dollar value of gross domestic product (GDP).

ii) Determine the dollar value of consumption spending in the economy.

Solutions

Expert Solution

Compensation of employees	175
Proprietors' income	50
Interest	35
Rent	25
Consumption of fixed capital	10
Less: Net foreign factor income	-3
	292

2) GDP = Personal consumption expenditures + Gross private domestic investment + Government purchases + (Exports - Imports)

292 = Personal consumption expenditures + 45 + 39 + (20 - 15)

292 = Personal consumption expenditures + 89

Personal consumption expenditures = 203

Rahul Sunny answered 1 year ago

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