Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 21, Problem 2.1P
To determine
To calculate the
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Question 1
In a simple economy, suppose that all income is either
compensation of employees or profits. Suppose also that
there are no indirect taxes. Calculate gross domestic
product from the following set of numbers. Show that the
expenditure approach and the income approach add up to
the same figure.
Consumption
$9500 Investment
$3000
Depreciation
$1750 Profits
$2400
Exports
$850
Compensation of
employees $11500
Government purchases
$3200
Direct taxes
$1200
Saving
$1600
Imports
$900
The following table shows data on personal consumption expenditures, gross private domestic investment, exports, imports, and government consumption expenditures and gross investment for the United States in 2007, as published by the Bureau of Economic Analysis. All figures are in billions of dollars.
Fill in the missing cells in the following table to calculate GDP.
Components
Personal Consumption Expenditures (CC)
$9,734.2
Gross Private Domestic Investment (II)
$2,125.4
Exports (XX)
$1,643
Imports (MM)
$2,351
Net exports of goods and services (X−MX−M)
Government Consumption Expenditures and Gross Investment (GG)
$2,689.8
Gross domestic product (GDP)
This method of calculating GDP, which involves summing the , is called the approach.
Refer to the following table when answering the following questions.
Table 2.2: U.S. 2014-2015 Domestic Income ($ billions)
Compensation of employees, paid
Wages and salaries
Supplements to wages and salaries
Business taxes
Business subsidies
Net operating surplus
Private enterprises
Surplus of government enterprises
Depreciation of fixed capital
(Source: Bureau of Economic Analysis)
$13,219
$17.651
$17.765
Consider Table 2.2. From this data, total GDP in 2014 was about
$14.963
2014
$18.527
9,264
7,487
1,777
1,210
57
4,489
4,509
-20
2,745
2015
9,704
7,866
1,838
1,238
57
4,575
4,593
-19
2,831
billion.
Chapter 21 Solutions
Principles of Economics (12th Edition)
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Similar questions
- Q3. In a simple economy, suppose that all income is either compensation of employees or profits. Suppose also that there are no indirect taxes. Calculate gross domestic product from the following set of numbers. Show that the expenditure approach and the income approach add up to the same figure Consumption Investment $9,500 3,000 1,750 Depreciation Profits 2,400 Exports Compensation of employees Government purchases Direct taxes 850 11,500 3,200 1,200 Saving Imports 1,600 900arrow_forwardNonearrow_forwardUsing the relevant information below: Gross Domestic Product (GDP) gross domestic product = consumption + investment + government purchases + net exports GDP = C + I + G + (X − M), calculate GDP using the expenditure approach. Inventory investment $50 billion Fixed investment $120 billion Consumer durables $420 billion Consumer nondurables $275 billion Interest $140 billion Indirect business taxes $45 billion Government wages and salaries $300 billion Government purchases of goods and services $110 billion Imports $80 billion Exports $40 billion Profits $320 billion Services $600 billionarrow_forward
- 21) Assume that with existing tax and spending laws, government spending exceeds government tax revenues. To cover the resulting shortfall, the government must: A) increase consumers' incomes. B) print more money. C) Borrow money in the financial markets. D) lower interest rates. 22) Gross Domestic Product (GDP) is defined as the market value of: A) all goods and services sold during the year by domestic and foreign producers. B) all final consumer goods produced during the year by domestic and foreign suppliers. C) all intermediate goods produced during the year by domestic and foreign suppliers. D) all final goods and services produced within the boundaries of an economy during the year by domestic and foreign-supplied resources. 23) In the equation GDP = C + I + G + F, in which F equals net export spending (i.e., total spending on exports minus total spending on imports), imports are subtracted from the other types of expenditures because: A)…arrow_forwardQUESTION 5 Refer to the table (all figures in billions of dollars). The disposable income (DI) for this economy is #3 Items Amount (i) (1) Personal Taxes $40 (2) Social Security Contributions $15 (3) Taxes on Production and Imports $20 (4) Corporate Income Taxes $40 (5) Transfer Payments $22 (6) U.S. Exports $24 (7) Undistributed Corporate Profits $35 (8) Govemment Purchases $90 (9) Gross Private Domestic Investment $75 (10) U.S. Imports $22 (11) Personal Consumption Expenditures $250 (12) Consumption of Fixed Capital $25 (13) Net Foreign Factor Income $10 (14) Statistical Discrepancy $0 O $274 $284 O $329 O $402 O $447 Click Save and Submit to save and submit. Click Save All Answers to save all answers.arrow_forwardUsing the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All figures are in billions. Category Billions Compensation of employees U.S. exports of goods and services Consumption of fixed capital Government purchases Taxes on production and imports Net private domestic investment Transfer payments U.S. imports of goods and services $ 224.2 17.8 11.8 59.4 14.4 52.1 13.9 16.5 Personal taxes 40.5 Net foreign factor income Personal consumption expenditures Statistical discrepancy 2.2 249.1 0.0 Instructions: Round your answers to 1 decimal place. a. GDP = $ 373.7 billion in b. NDP = $ 376.3 billion c. NI = $ 378.5 billionarrow_forward
- Suppose you are given the following information about some hypothetical economy and its national income accounts. Use this information to answer the questions that follow. (Amounts are in millions of Kshs.) Indirect Business Taxes 459.50 Corporate profits 604.45 Corporate profits taxes 234.70 Retained earnings 165.40 Proprietors' income 519.20 Rental Income 31.05 Net Interest 585.55 Exports 842.85 Imports 1190.20 Income Receipts from rest of world 427.8 Income Payments to rest of world 377.45 Net National Product 6190.4 Government expenditures for Goods and Services 1358.25 Personal current Transfer receipts 871.15 Social Security Taxes (employee & employer) 490.75 Personal Consumption expenditures 4892.85 Gross Private Domestic Investment 1082.45 Disposable personal income 5128.75 a. Find GDP and GNP b. Find depreciation (capital consumption allowance) c. Find National Incomearrow_forwardQUESTION 3 Refer to the table (all figures in billions of dollars). The national income (NI) for this economy is #3 Items Amount (i) (1) Personal Taxes $40 (2) Social Security Contributions $15 (3) Taxes on Production and Imports $20 (4) Corporate Income Taxes $40 (5) Transfer Payments $22 (6) U.S. Exports $24 (7) Undistributed Corporate Profits $35 (8) Government Purchases $90 (9) Gross Private Domestic Investment $75 (10) U.S. Imports $22 (11) Personal Consumption Expenditures $250 (12) Consumption of Fixed Capital $25 (13) Net Foreign Factor Income $10 (14) Statistical Discrepancy $0 $314 $362 $382 O $402 O $417 O 0 0 0 0arrow_forwardUse the following table to answer the next question. The following national income data for an economy is in billions of dollars. Consumption = 5,100 Investment = 1,100 Government Taxes = 1,050 Government Purchases = 1,400 Exports = 950 Imports = 850 Net foreign factor income = 20 GDP for this economy is $7,700 billion $6,400 billion $10,470 billion $8,500 billionarrow_forward
- Please give a detailed response for the question below.arrow_forwardUse the following table to answer the question below for an economy that has no government, no international trade or any association with other countries: Consumption (billions) Level of Output (billions) $240 $260 $280 $300 $320 $340 $360 $340 $380 $356 $400 $372 If gross investment is $4 billion, the equilibrium level of GDP (output) will be: a) $340 b) $280 Oc) $260 $244 $260 $276 $292 $308 $324 d) $360arrow_forwardConsumption $400 Imports $ 10 Net investment $ 20 Government purchases $ 100 Exports $ 20 Capital consumption allowance $ 20 Statistical discrepancy $ 6 Receipts of factor income from the rest of the world $ 10 Payments of the factor income to the rest of the world $ 13 What is the GDP for this economy? What is the GNP for this economy? What is the NNP for this economy? What is the national income for this economy? What is the gross investment in for this economy?arrow_forward
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