This question has five parts. In the space below, write the letter and your resp

Question

This question has five parts. In the space below, write the letter and your response to parts a-e. Put your answers for each letter on separate rows. (10 points, 2 points each)

Here is hypothetical data from the national income accounts for the current year, in billions of nominal dollars.

Determine the nominal values in a-d.

a. Gross domestic product (GDP)   

b. Net domestic product (NDP)      

c. National Income (NI)                 

d. Personal Income (PI)             

e. (unrelated to a-d) In 1-2 sentences, give one shortcoming of GDP and, in your own words, explain why it is a shortcoming.

Compensation of employees (W) 696 Corporate Income Taxes (CIT) 40 Corporate Profits (CP) 334 Depreciation (D) 166 Dividends (DIV) 98 Government purchases (G) 618 Gross private domestic investment (Ig) 376 Interest (INT) 130 Net exports (Xn) -48 Net foreign factor income (NFFI) 64 Personal consumption expenditures (C) 822 Personal saving (S) 96 Personal Taxes (T) 252 Proprietor's Income (PRI) 192 Rents (R) 134 Social Security Contributions (SS) 104 Statistical Discrepancy (SD) 38 Taxes on production and imports (TPI) 142 Transfer payments (TP) 24 Undistributed corporate profits (UCP) 196

Explanation / Answer

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

Or GDP = 822 + 376 + 618 + (-48)

Or GDP = $1768 (in Billions)

b) NDP = GDP – Depreciation (D)

Or NDP = 1786 – 166

Or NDP= $1620 (in Billions)

c) National Income(NI) = Compensation of employees (W) + Rents (R) + Interest (INT) + Proprietor's Income (PRI) + Corporate Profits (CP) + Taxes on production and imports (TPI)

Or NI = 696 + 134 + 130 + 192 + 334 + 142

Or NI = $1628 (in Billions)

d) Personal Income (PI) = NI - Undistributed corporate profits (UCP) - Corporate Income Taxes (CIT) - Social Security Contributions (SS) + Transfer payments (TP) + Interest On Public Debt.

Or PI = 1628 – 196 – 40 – 104 + 24 + 0

Or PI = $1312 (in Billions)

e) One shortcoming of GDP is that it does not take into consideration the quality of products. It only takes into account how much in terms of volume is being produced. However if Year 2 produces less goods and services but of very high quality in comparison to year 1, then this will not be reflected in the GDP. The GDP will be recorded as less in Year 2 than in Year 1 and Year 1 will be considered better than Year 2.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.