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Chapter 8: Q.21 (page 188)

Suppose that U.S. consumption spending is \(13 trillion, gross private domestic investment is \)3.5 trillion, government spending is \(4 trillion, and net exports are \)0.5 trillion. If interest income is \(1 trillion, depreciation is \)0.5 trillion, wages are \(12 trillion, and rental income is \)0.75 trillion, what is the net domestic product?

Short Answer

Expert verified

The net domestic product is$19.5trillion.

Step by step solution

01

Given information 

U.S. consumer spending is $13 trillion.

Gross private domestic investment is $3.5 trillion.

Government spending is $4 trillion.

Net exports are $0.5 trillion.

Interest income is $1 trillion

Depreciation is $0.5 trillion.

Wages are $12 trillion.

Rental income is $0.75 trillion.

02

Explanation

First calculating the GDP, we find the net domestic product.

GDP = Consumption (C) + Investment (I) + Government spending (G)

+ Net exports (X-M)

Now,

GDP =13+3.5+4+(-0.5)=20

Depreciation=$0.5trillion

Calculating net domestic product,

NDP = gross domestic product (GDP) - depreciation

NDP = 20-0.5=19.5

Hence the net domestic product is $19.5trillion.

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