Question

Using the following data($ billions) for a given year and assuming that GDP equals GNP,calculate (a) gross domestic product (b) national income (c) net national income (d) indirect business taxes.

1.consumption spending = $8000

2.interest income = 500

3.rental income = 200

4.investment spending = 2,500

5.profits = 2,000

6.wages salaries = $ 7000

7.depreciation =1550

8.government spending =2000

9.net export spending = -450

Answer 1

If GDP is the same as GNP

A) $GDP=C+I+G+X_n$

$GDP=\$8000+\$2500+\$2000-\$450$

$GDP=\$12050$

B) National income=

$w+r+i+\pi+Tb$

Where Tb is indirect business tax

$NI=\$7000+\$200+\$500+\$2000+Tb$TbTbTbTbTbTbTbTbTTbTbTbTbTbTbTTbTbTbTb

$NI=\$11700+Tb$

C) Net national product= $GDP-D$

Where D is depreciation.

$NNP=\$12050-\$1550$

$NNP=\$10500$

D) Indirect business tax

$NI=NNP-Tb$

but $NI=\$11700+Tb$

$\therefore \$11700+Tb=\$10500-Tb$

$Tb=-\$600$

$NI=\$11700-\$600=\$11100$