Question

Working with Numbers and Graphs Q9

Use the following table to answer the questions that follow.

Item	Dollar Amount
	(Billion Dollars)
Durable goods	220
Nondurable goods	400
Services	700
Fixed investment	120
Inventory investment	20
Government purchases	500
Exports	100
Imports	150
Capital consumption allowance	20
Compensation of employees	700
Proprietors’ income	480
Corporate profits	200
Rental income	200
Income earned from the rest of the world	40
Income earned by the rest of the world	200
Indirect business taxes	80
Statistical discrepancy	30
Undistributed corporate profits	20
Social insurance taxes	80
Corporate profits taxes	30
Transfer payments	50
Personal taxes	80
Net interest	20

Complete the following table by calculating GDP, NDP, national income, personal income, disposable income, and net exports.

Item	Dollar Amount
	(Billion Dollars)
GDP
NDP
National income
Personal income
Disposable income
Net exports

If purchases of new capital goods are $90 billion, then purchases of new residential housing are equal to $_______ billion.

Answer 1

GDP = Private final Consumption expenditure ( Durable goods+ Non-durable goods + Services) + Government purchases+ Investment expenditure ( Fixed investment + Inventory investment) + Net exports ( Exports - imports)

= 220+ 400+ 700+ 500+ 120+20 +100-150

= 1910

GDP = $1910 billion

NDP at Market price = GDP at market price - Capital Consumption allowance

= 1910- 20

= 1890

NDP at factor cost = NDP at market price - Indirect business taxes

= 1890 - 80

= 1810

NDP = $1810 billion.

National income = NDP + Net factor income from abroad ( Income earned from the rest of the world - income earned by the rest of the world)

= 1810+ 40-200

= 1650

National income = $1650 billion

Personal income = Private income( National income + Transfer payments) - Undistributed profits - Corporation taxes

= 1650 + 50 - 20- 30

= 1650

Personal income =$1650 billion

Disposable income = Personal income - Personal taxes

= 1650- 80

= 1570

Disposable income = $1570 billion

Net exports = Exports - Imports

= 100-150

= -50

Net exports = -$50 billion.

The sum of the purchases of newly produced capital goods and the purchases of new residential housing is referred as Fixed investment.

Purchase of new residential housing = Fixed investment - Purchase of new capital good

= 120 - 90

= $30 billion.

If purchases of new capital goods are $90 billion, then purchases of new residential housing are equal to $ 30. billion