Question

1. Consider the macroeconomic data for a country (amounts expressed in billions of USD):

•Investment expenditures = 300

•Government expenditures = 250

•Exports = 400•Imports = 450

•Gross national incomei= 1120

•Domestic labor income = 180

•Foreign labor income = 320

•Domestic capital income = 80

•Foreign capital income = 240

•Net indirect taxes = 100•

Net foreign incomeii= (–80)

Compute the following indicators:

1.1)National income

1.2)Capital depreciation

1.3)Gross domestic product

1.4)Private consumption expenditures

1.5)Net domestic product

1.6)Net national income

Answer 1

All the amounts are expressed in billions of USD

1.1 National income (Y) = C + I + G + (X − M)

where C stands for Consumption, I for investment, G for Government spending, X for Exports and M for Imports

So here,

National Income= 470+300+250+(400-450)

Y = 970

GNP = Consumption + Investment + Government + X (net exports) + Z (net income earned by domestic residents from overseas investments minus net income earned by foreign residents from domestic investments).

GNP is Y = C + I + G + X + Z.

1120 = C+ 300+ 250+ 400+ (180+80-320+240)

1120 = C+300+250+400-300

1120 = C+650

C = 1120-650

C = 470

1.2 Capital Depreciation

Depreciation = GNP at FC - NDP at MP - Factor income from abroad + Factor income to abroad + Indirect taxes - Subsidies

= 1020- 970-(320+240)+(180+80)+100-0

= 150

GNP at factor cost = GNP- Net Indirect Taxes

GNP at FC = 1120-100

GNP at FC= 1020

1.3 Gross domestic product

GDP = GNP (Gross National Product) - net property income from abroad.

GDP = 1120 - (-80)

GDP = 1200

1.4 Private consumption expenditures

Consumer Spending as calculated above is 470 which will also be considered as private consumer expenditure.

1.5 Net domestic product

Net Domestic Product = Gross Domestic Product - Depreciation

NDP= 1200-150

NDP=1050