Use the national income data in the table below, compute (a) GDP, (b) NDP, and (

Question

Use the national income data in the table below, compute (a) GDP, (b) NDP, and (c) NI. National Income Accounting Data Amount (billions) Compensation of Employees $921 Net U.S. Exports of goods and services 21 Consumption of fixed capital 153 Government purchases 331 Taxes on production and imports 122 Net private domestic investment 30 Transfer payments 12 U.S. imports of goods and services 33.0 Personal Taxes 81 Net foreign factor income 4 Personal consumption expenditures 964 Statistical discrepancy 0

Explanation / Answer

Consider the data:

National Income Accounting Data Amount (billions)

Compensation of Employees $921

Net U.S. Exports of goods and services 21

Consumption of fixed capital 153

Government purchases 331

Taxes on production and imports 122

Net private domestic investment 30

Transfer payments 12

U.S. imports of goods and services 33.0

Personal Taxes 81

Net foreign factor income 4

Personal consumption expenditures 964

Statistical discrepancy 0

a) GDP = Personal consumption expenditures (C) + Gross private domestic investment (Ig) + Government purchases (G) + Net exports (Xn)

= 964 + (30 + 153) + 331 + (21)

= $1499

Hence GDP is valued at $1499.

b) NDP = GDP - CFC (Consumption of fixed capital)

= 1499 - 153

= $1,346

c) National Income = NDP - Net foreign factor income - Indirect taxes

= 1346 – 4 – 122

= $1220

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