Question

Value Added 100 $250 $ 500 5 1.850 the difference between GDP and each of the What Wat is the GDP for this economy 8. What is the GNP for this economy? 9. What is the NNP for this economy? 10. What is the national income for this economy? 11. What is the gross investment in this economy? 12. Indirect business taxes and capital consumption allowance are not income, yet they are included in the calculation of GDP as income received. Why do we add these two nonincome components to the other components of income (like wages, rent, interest. profits, and net factor income from abroad) to find GDP? 13. Why has nominal GDP increased faster than real GDP in the United States over time? What would it mean if an economy had real GDP increasing faster than nominal GDP? 14. We usually discuss GDP in terms of what is included in the definition. What is not included in GDP? Why are these things excluded? 15. If a surfboard is produced this year but not sold until next year, how is it counted in this year's GDP and not next year's? Year 2 Personal income Disposable personal income Year! Quantity Price Orange 100 5 Pears - 100 53 Quantity 150 75 Price $5 $4 2. What is the growth rate of constant-dollar real GDP using year I as the base year? b. What is the growth rate of constant-dollar real GDP using year 2 as the base year? 4. Why do total expenditures on final goods and services equal total income in the economy? 5. Why do we not measure national output by simply counting the total number of goods and services pro- duced each year? Why is the CPI not a useful measure of your cost of living? Use the following national income accounting information to answer exercises 7-11: Consumption $ 400 Imports 5 10 Net investment $ 20 Government purchases $100 Exports $ 20 Capital consumption allowance $ 20 Statistical discrepancy 5 6 Receipts of factor income from the rest of the world $ 10 Payments of factor income to the $ 13 rest of the world

Questions # 7,8,9, 10 and 11

Answer 1

7.

The GDP can be defined the market value of all goods and services which are produced in the domestic territory of the country in the current financial years.

GDP at MP=C+I(net investment + capital consumption allowance) +G+X-M

=400+(20+20)+100+20-10

=$550

8.

GNP at MP= GDP+ net factor income from abroad

=550+10-13

=$547

9.

NNP at MP=GNP- capital consumption allowance

=547-20

=$527

10.

National Income (NNP at FC)= NNP at MP + net indirect tax

=527-0

=$527

11.

Gross investment= Net investment +capital consumption allowance

=20+20

=$40