Question

II. Answer the following questions (5 points). You need to use the table below to answer. (hint: answer the question 11 first.) Use the following national income accounting information to answer exercises 7-11: Consumption $ 400 Imports $ 10 Net investment $ 20 7. What is the GDP for this economy? Government purchases $ 100 8. What is the GNP for this economy? Exports $ 20 9. What is the NNP for this economy? Capital consumption allowance $ 20 10. What is the national income for this economy? Statistical discrepancy $ 6 11. What is the gross investment in this economy? Receipts of factor income from the rest of the world $ 10 Payments of factor income to the rest of the world $ 13

Could you please answer 7,8,9,10 11

Answer 1

Sol :

7- The formula to calculate the GDP of the economy through the expenditure approach is

GDP= Consumption (C) +Investment (I) +Government expenditure(G) +Net exports(X-M)

And here we will put the value according to the information/data given.

GDP= Consumption (C) +Net Investment (I) +Government purchases+Exports - Imports

GDP=400+20+100+(20-10) =520+10=530

So the GDP of the economy is $530.

8- To obtain GNP of the economy we have to add net income factor income from abroad with the GDP.

GNP= GDP+ net factor income from abroad(NFIA)

And here to get NFIA we have to subtract payments of factor income to the rest of the world from receipts of factor income from the rest of the world.

GNP= $530+($10 - $13) = $527

So the GNP of the economy is $527.

9- We can get the value of NNP by subtracting capital consumption allowance or depreciation from GNP.

So the formula is :

NNP=GNP - Depreciation/Capital consumption allowance

NNP=$527- $20= $507.

So the NNP is $507 for this economy.

10- National Income is calculated by adding statistical discrepancy with the NNP.

So National Income= NNP+Statistical discrepancy

=> $507+$6=$513

So the National income of this economy is $513.

11- Gross investment is calculated by adding net investment with Capital consumption allowance and here we can calculate this :

G. Investment= Net Investment+Capital consumption allowance

=> $20+$20= $40.

So the gross investment is $40 for this economy.