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Chapter 7: Q5. (page 153)

Using the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All figures are in billions.

Short Answer

Expert verified

  1. The gross domestic product of the economy for the year is $343.7 billion.

  2. The NDP of the economy is $331.9 billion.

  3. The economy’s national income is $329.7 billion.

Step by step solution

01

Explanation for part (a)

GDP = Personal consumption expenditures + Government purchases + Net private domestic investment + Depreciation + US exports of goods and services – US imports of goods and services

GDP = 219.1 + 59.4 + 52.1 + 11.8 + 17.8 – 16.5

GDP = 343.7

Therefore, the economy’s GDP is $343.7 billion.

02

Explanation for part (b)

NDP = GDP – Depreciation

NDP = 343.7 – 11.8

NDP = 331.9

Therefore, the economy’s NDP is $331.9 billion

03

Explanation for part (c)

NI = GDP + NFFI – Depreciation – Statistical Discrepancies

NI = 343.7 – 2.2 – 11.8

NI = 329.7

The national income of the economy is $327.9 billion.

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Most popular questions from this chapter

How do “free” products make the calculation of GDP more difficult? What are hedonic adjustments, and why are they necessary? Will inflation tend to be overstated or understated if quality improvements are not accounted for? Explain

Suppose that this year’s nominal GDP is \(16 trillion. To account for the effects of inflation, we construct a price-level index in which an index value of 100 represents the price level 5 years ago. Using that index, we find that this year’s real GDP is \)15 trillion. Given those numbers, we can conclude that the current value of the index is:

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b. lower than 100.

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