Answer to Question #156431 in Economics for Michael

Question

Given the information below: Nmillion

Transfer payments..60

Subsidies.25

Welfare payments.150

Government Purchases..200

Imports..150

Indirect Taxes...80

Personal Consumption Expenditure..750

Net Private Domestic Investment 400

Payments for factor income to the rest of the world.20

Exports.200

Personal Taxes150

Personal interest income from government & households...100

Depreciation150

Dividend (Undistributed).15

Receipts of factor income from the rest of the world15

Corporate profits (undistributed)200

Company taxes.120

Calculate:

GDP (ii) GNP (iii) NNP (iv) N.I (v) P.I (vi)Net Export

Disposable Personal Income (viii) Gross Private Consumption

Answer 1

i) The GDP can be calculated as follows:

$$GDP=C+I+G+(X-M),$$

here, $C$ is consumer spending, $I$ is investment spending, $G$ is government spending, $X$ is exports of goods and services and $M$ is imports of goods and services.

Then, we get:

GDP= Government Purchases+Personal Consumption Expenditure+Net Private Domestic Investment+Depreciation+Exports-Imports=$200+$750+$400+$150+$200-$150=$1550.

ii) GNP can be calculated as follows:

GNP=GDP+Net factor income from abroad=GDP+Receipts of factor income from the rest of the world-Payments for factor income to the rest of the world=$1550+$15-$20=$1545.

iii) NNP can be calculated as follows:

NNP=GNP-Depreciation=$1545-$150=$1395.

iv)NI can be calculated as follows:

NI=Wages+Rents+Interest+Profits=Personal interest income from government & households+Corporate profits+Company taxes+Dividend=$100+$200+$120+$15=$435

v) PI can be calculated as follows:

PI=NI-Payroll taxes-Corporate profits taxes-Undistributed corporate profits+Transfer payments+Subsidies+Welfare payments=$435-$200+$60+$25+$150=$470.

vi) Net Export can be calculated as follows:

Net Export= Exports-Imports=$200-$150=$50.

vii) Disposable Personal Income can be calculated as follows:

Disposable Personal Income=Personal Income-Personal Taxes=$470-$150=$320.

viii) Gross Private Consumption can be calculated as follows:

Gross Private Consumption=Personal Consumption Expenditure+Net Private Domestic Investment=$750+$400=$1150.