Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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How much is
how much is net investment
how much is
![### National Income Accounting Exercise
**Use the following data to answer the questions below:**
| Category | Billions of Dollars |
|--------------------------------|---------------------|
| Consumption | $200 |
| Depreciation | 20 |
| Retained earnings | 12 |
| Gross investment | 30 |
| Imports | 60 |
| Exports | 50 |
| Net foreign factor income | 10 |
| Government purchases | 80 |
**Instructions:** Enter your responses rounded to the nearest whole number.
1. **How much is GDP?**
GDP (Gross Domestic Product) is calculated as:
\[
GDP = Consumption + Gross Investment + Government Purchases + (Exports - Imports)
\]
**Answer:**
$ \_\_\_\_\_ billion
2. **How much is net investment?**
Net Investment is calculated as:
\[
\text{Net Investment} = \text{Gross Investment} - \text{Depreciation}
\]
**Answer:**
$ \_\_\_\_\_ billion
3. **How much is national income?**
National Income can be calculated as:
\[
\text{National Income} = \text{GDP} - \text{Depreciation} + \text{Net Foreign Factor Income}
\]
**Answer:**
$ \_\_\_\_\_ billion
**Note:** Each value should be provided in billions of dollars, rounded to the nearest whole number.
---
### Explanation of Data:
- **Consumption:** Refers to the total spending by households on goods and services.
- **Depreciation:** Accounts for the reduction in value of capital goods over time.
- **Retained earnings:** Portion of the profits not paid out as dividends but retained by the company to be reinvested.
- **Gross Investment:** Total spending on new capital or infrastructure.
- **Imports:** Value of goods and services purchased from abroad.
- **Exports:** Value of goods and services sold abroad.
- **Net Foreign Factor Income:** The difference between the income earned by nationals abroad and the income earned by foreigners domestically.
- **Government Purchases:** Total government expenditures on goods and services.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Feef6b36e-9f25-4a0e-86ea-e59331f34bfc%2F2d5a9417-9e13-4be6-a9ad-5420a7670408%2F7cmhrv_reoriented.jpeg&w=3840&q=75)
Transcribed Image Text:### National Income Accounting Exercise
**Use the following data to answer the questions below:**
| Category | Billions of Dollars |
|--------------------------------|---------------------|
| Consumption | $200 |
| Depreciation | 20 |
| Retained earnings | 12 |
| Gross investment | 30 |
| Imports | 60 |
| Exports | 50 |
| Net foreign factor income | 10 |
| Government purchases | 80 |
**Instructions:** Enter your responses rounded to the nearest whole number.
1. **How much is GDP?**
GDP (Gross Domestic Product) is calculated as:
\[
GDP = Consumption + Gross Investment + Government Purchases + (Exports - Imports)
\]
**Answer:**
$ \_\_\_\_\_ billion
2. **How much is net investment?**
Net Investment is calculated as:
\[
\text{Net Investment} = \text{Gross Investment} - \text{Depreciation}
\]
**Answer:**
$ \_\_\_\_\_ billion
3. **How much is national income?**
National Income can be calculated as:
\[
\text{National Income} = \text{GDP} - \text{Depreciation} + \text{Net Foreign Factor Income}
\]
**Answer:**
$ \_\_\_\_\_ billion
**Note:** Each value should be provided in billions of dollars, rounded to the nearest whole number.
---
### Explanation of Data:
- **Consumption:** Refers to the total spending by households on goods and services.
- **Depreciation:** Accounts for the reduction in value of capital goods over time.
- **Retained earnings:** Portion of the profits not paid out as dividends but retained by the company to be reinvested.
- **Gross Investment:** Total spending on new capital or infrastructure.
- **Imports:** Value of goods and services purchased from abroad.
- **Exports:** Value of goods and services sold abroad.
- **Net Foreign Factor Income:** The difference between the income earned by nationals abroad and the income earned by foreigners domestically.
- **Government Purchases:** Total government expenditures on goods and services.
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