Below are hypothetical data for the economy in a particular year. There is no st
ID: 1253464 • Letter: B
Question
Below are hypothetical data for the economy in a particular year. There is no statistical discrepancy.Export 179
Capital consumption allowances 79
Government current purchases of G & S 134
Indirect taxes (less subsidies) 76
Wages, salaries, supplementary labor income 373
Gross Investment 139
Personal saving 49
Corporate income taxes 17
Government transfer payments 82
Net income from nonfarm unincorporated business, including rent 35
Personal consumption expenditure 398
Imports 170
Undistributed corporate profits 7
Personal taxes 136
Compute each of the following approach and show your numerical calculation clearly:
a) Use Expenditure Approach to compute GDP
__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Explanation / Answer
GDP s defined as the market value of all final goods and services produced by the factors of producton located n the country during a perod of one year.GDP is the total ncome generated from producton wthin the terrtoral boundares of an economy, irrespectve of whether it belongs to the inhabitants of that nation or not. such income is known as Gross Domestic Product(GDP).
Here , the measurement procedure is actually three-fold. we use 1.product method,2.income method, and 3.expenditure method to compute GDP.
GDP(Product Approach): it s a summary statstic, which is wdely used by economsts and policy analysis to assess the rate of growth of an economy durng a year.
GDP(Income Approach): The measurement of GDP is to compute it by addition of all factor incomes generated in the production of goods and sevices.
GDP can be measured by takng into account all fnal expendtures n the economy. There are three dstnct types of expenditure as they are commtted by households. Firms and government respectvely.
These expenditures are classified into followng types
1.Private Consumption Expendture(C):The sum of Expenditure on both the durable and non-durable goods as well as services for consumption purposes.
2.Investment Expenditure(I): it is the total expenditure incurred for the replacement of capital goods and for additional investment.
3.Government purchases of Goods and Services(G): it s the sum of expenditure on consumption and capital goods by the government and
4.Net Exports(X-M) it consittute the difference between the expenditure or rest of the world on output of the national economy and the expenditure of the national economy on output of the rest of the world.
GDP=C+I+G+(X-M) or
GDPmp=GNPmp-Net ncome from Abroad,or
GDPfc=GDPmp-Net ndrect Taxes.
so, we have to calculate GNP at Market Prces and Net income from abroad.
GNP at Market Prces =Personal Consumpton expenditure+Gross nvestment+Governement purchases of goods and services +Net Exports(Exports-Imports)+Net Factor inome from abroad.
Net Income from abroad=128(76+17+35)-136=-8
Net exports(X-M)=179-170=9
Calculaton:GNP at market prces=
PC Expenditure=398+Gross Investment=139+Governement purchases of G&S=134+Net Exports=9+Net ncome from abroad=-8
so GNP at Market prces=672
then GDP at Market Prces =GNPmp-Net income from abroad
=672-(-8)=680
then GDP at Factor Prces=GDPmp-net ndirect taxes
=680-76=604
GDP = C+I+G+(X-M)=398+139+134+9=680.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.