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Chapter 4: Problem 116
When capital consumption in an economy equals $$\$ 500,000,$$ and the GNP is $$\$ 2,050,000,$$ what is the NNP? shown in the capital account?
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Assume our economy produces only one good, product \(\mathrm{X}\), and that its quantities and prices over time are given in the following table: $$ \begin{array}{lcc} \text { Year } & \text { Units of Output } & \text { Price of } \mathrm{X} \\ 1 & 5 & \$ 10 \\ 2 & 7 & 20 \\ 3 & 8 & 25 \\ 4 & 10 & 30 \\ 5 & 11 & 28 \end{array} $$ a) Compute the price index in percent using Year 1 as the base year; i.e., (Year \(1=100\) ). b) Compute the unadjusted, or money GNP. c) Compute the adjusted, or real GNP.
If a machine costs initially $$\$ 1,000,000,$$ lasts for 10 years, and has a scrap value of $$\$ 100,000$$ at the end of its lifetime, how much depreciation should be taken into account each year in the current accounts? And how is this
There are basically two approaches to GNP: the expenditure approach and the income approach. The following is a list of national income figures for a given year. Arrange them in the form of a consolidated income statement with revenues and allocations ( expenses ') for the whole of the economy. The figures are in billions of dollars. \(\begin{array}{lr}\text { Personal consumption expenditures (C) } & 660 \\\ \text { Transfer payments } & 127 \\ \text { Rents } & 40 \\ \text { Capital consumption allowance (depreciation) (D) } & 95 \\ \text { Social security taxes } & 46 \\ \text { Interest } & 20 \\ \text { Proprietor's income } & 68 \\ \text { Net exports } & 2 \\ \text { Dividends } & 6 \\ \text { Compensation of employees } & 642 \\ \text { Indirect business taxes } & 101 \\\ \text { Undistributed corporate profits } & 40 \\ \text { Personal taxes } & 116 \\ \text { Corporate income taxes } & 35 \\ \text { Corporate profits } & 81 \\ \text { Government purchases of goods and services } & 233 \\\ \text { Net private domestic investment }\left(I_{\text {net }}\right) & 57 \\ \text { Personal saving } & 60 \\ \text { Calculate, in addition, Personal Income (PI) and Disposable } \\ \text { Personal Income (DPI). } & \end{array}\)
What are the two different ways of looking at the index of the general price level?
Suppose that in the base year, GNP $$=\$ 1000$$ billion. Since the base year, money GNP has increased $$\$ 500$$ billion while real GNP has increased $$\$ 250$$ billion. What is the current price index? In which year is society better off? Why?
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