Answered: Suppose that there are two individuals…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose that there are two individuals in an economy, Person 1 and Person 2. Person 1 buys a
second-hand car from Person 2 for $12,000.
10. What is the change in GDP according to the Income Approach here? What is the change
of each person’s contribution to GDP according to the Income Approach?
Suppose now instead that an individual was buying $400 of wine from a domestic producer of
wine. Now suppose that this individual decides to import $400 of wine instead.
11. What is the change of Consumption (C), Investment (I), Government Spending (G), Net
Exports (NX), and GDP as calculated by the Expenditure Approach in this example?

Finally, now consider the following table:
Government Purchases of Goods and
Services
$58.5
Indirect Taxes Less Subsidies $29
Personal Income Taxes $41.5
Wages and Compensation $165.5
Interest on Public Debt $15.5
Consumption Expenditure $168.4
Exports $90.9
Depreciation $33.5
Imports $93.3
Gross Investment $67.2
Net Interest Income $19.0
Business Profits Before Taxes $45.5
12. What is GDP according to the Expenditure Approach? What is GDP according to the
Income Approach? Show your work.

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