Question

Personal consumption expenditures	$245
Net foreign factor income	4
Transfer payments	12
Rents	14
Consumption of fixed capital (depreciation)	27
Statistical discrepancy	8
Social Security contributions	20
Interest	13
Proprietors’ income	33
Net exports	11
Dividends	16
Compensation of employees	223
Taxes on production and imports	18
Undistributed corporate profits	21
Personal taxes	26
Corporate income taxes	19
Corporate profits	56
Government purchases	72
Net private domestic investment	33
Personal saving	20

4. (Chapter 27) Use the attached National Income and Output Worksheet, and the national income data table on page 550 of your textbook (problem # 4) to compute the followings using both the Expenditure Approach and the Income Approach (be sure to fill in the values and show the calculations): (a) GDP, (b) NDP, (c) NI, (d); Adjust NI (from part c) as required to obtain PI; (e) Adjust PI (from part d) as required to obtain DI. Explain the followings NIPA concepts:

1. GDP
2. NDP
3. NI
4. PI
5. DI
6. Net Foreign Factor Income?

                                                                                                                                                                                                                                                                                                                       10pts.

National Income Accounting Worksheet

Measure	Value-Exp. Approach	Value-Income Approach
Gross Domestic Product (GDP)=	Components: C (        ) + Ig (       ) +                    G (       ) +                   = Xn (      ) =GDP=	Components: Wages & Salaries (           ) + Rents (            ) + Interest (            ) +                                       Proprietor’s Income (            )       + Corporate Profits   (               ) + Taxes on Production and Imports (              ) -Net Foreign Factor Income (          ) + Statistical Discrepancy (            ) +Consumption of Fixed Capital (                ) =GDP=
Net Domestic Product (NDP)=	GDP (            ) - Consumption of Fixed Capital (          ) =NDP=	GDP (           ) - Consumption of Fixed Capital (          ) =NDP=
National Income (NI)=	NDP -Statistical Discrepancy (                ) +Net Foreign Factor Income (                ) =NI=	Components: Wages & Salaries (           ) + Rents (            ) + Interest (            ) +                                      Proprietor’s Income (            )       + Corporate Profits    (               ) + Taxes on Production and Imports (              ) =NI=
Personal Income (PI)=	National Income -Taxes on production and Imports (              ) -Social Security Contributions (            ) -Corporate Income Tax (               ) -Undistributed Corporate Profit (              ) + Transfer Payments (                ) =PI=	National Income -Taxes on production and Imports (              ) -Social Security Contributions (            ) -Corporate Income Tax (               ) -Undistributed Corporate Profit (              ) + Transfer Payments (                ) =PI=
Disposable Income (DI)=	PI -Personal Taxes (               ) =DI=	PI -Personal Taxes (               ) =DI=

Answer 1

Ans.

Measure	Value-Exp. Approach	Value-Income Approach
Gross Domestic Product (GDP)=	Components: C ( 245 ) + Ig[ Inet + dep.] ( 60 ) +                    G ( 72 ) +                   = Xn ( 11 ) =GDP= $388	Components: Wages & Salaries ( 223 ) + Rents ( 14 ) + Interest ( 13 ) +                                       Proprietor’s Income (33   )       + Corporate Profits   ( 56 ) + Taxes on Production and Imports ( 18   ) -Net Foreign Factor Income ( 4 ) + Statistical Discrepancy ( 8 ) +Consumption of Fixed Capital ( 27 ) =GDP= 388
Net Domestic Product (NDP)=	GDP ( 388 ) - Consumption of Fixed Capital ( 27 ) =NDP= 361	GDP ( 388 ) - Consumption of Fixed Capital ( 27 ) =NDP= 361
National Income (NI)=	NDP ( 361) -Statistical Discrepancy ( 8 ) +Net Foreign Factor Income ( 4 ) =NI= 357	Components: Wages & Salaries ( 223 ) + Rents ( 14 ) + Interest ( 13 ) +                                      Proprietor’s Income ( 33 )       + Corporate Profits    ( 56 ) + Taxes on Production and Imports ( 18 ) =NI= 357
Personal Income (PI)=	National Income ( 357) -Taxes on production and Imports ( 18 ) -Social Security Contributions ( 20 ) -Corporate Income Tax ( 19 ) -Undistributed Corporate Profit ( 21 ) + Transfer Payments ( 12 ) =PI= 291	National Income ( 357) -Taxes on production and Imports ( 18 ) -Social Security Contributions ( 20 ) -Corporate Income Tax ( 19 ) -Undistributed Corporate Profit ( 21 ) + Transfer Payments ( 12 ) =PI= 291
Disposable Income (DI)=	PI (291) -Personal Taxes ( 26 ) =DI= 265	PI (291) -Personal Taxes ( 26 ) =DI= 265