Assume the economic activity of the economy in a given year consists of the foll
ID: 1254854 • Letter: A
Question
Assume the economic activity of the economy in a given year consists of the following:• Steel producers fabricate Php. 4 billion of farm machinery, which is sold to farmers;
• Farmers produce 40 million sacks of rice, which is sold for Php. 25 billion to millers. The farm machinery depreciates Php. 2 billion,
• Millers process the rice and keep half in inventory, valued at Php. 30 billion. The remaining rice is sold to retailers also for Php. 30 billion;
• Retailers sell the rice for Php. 40 billion;
• The government spends Php. 15 billion in payrolls, of which Php. 12 billion is financed by indirect taxes.
a. What is the numerical value of Gross National product using the expenditure approach?
b. What is the value of GNP using the value-added approach?
c. What is the value of Net National Product?
d. What is the value of National Income?
Explanation / Answer
a. What is the numerical value of Gross National product using the expenditure approach?
Php.4 billion farm machinery is an investment.
Final processed rice sold by retailers Php.40 billions is consumption.
Inventory of $30 billions is considered as investment.
Government spending is Php.15 billions
GNP = Consumption + Investment + Government spending.
= Php. 40 billions + Php 4 billions +Php 30 billions + Php 15 billions.
= Php 89 billions.
b. What is the value of GNP using the value-added approach?
Final Output of machinery is Php4 billions
Value added by steel fabricaters = Php. 4 billions.
Value added for rice:
Value added by farmers = Php 25 billion
Value added by millers = Php 60 billions – Php 25 billions
= Php 35 billions.
Value added by the retailers= Php 40 billions–Php 30 billions
= Php 10 billions.
Total value added for the rice = Php 25 billions + Php 35 billions + Php 10 billions
= Php 70 billions
Government spending = 15 billions
GNP = Php 4 billions + Php70 billions + Php 15 billions
= Php 89 billion.
c. What is the value of Net National Product?
Net national Product(NNP) = GNP – Depreciation
= Php. 89 billions – Php 2 billions
= Php 87 billions.
d. What is the value of National Income?
National Income = NNP– indirect taxes
= Php 87 billions – Php.12 billions
= Php 75 billions
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