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16 September, 01:52

In a simple economy suppose that all income is either compensation of employees or profits. Suppose also that there are no indirect taxes. All data are in billion dollars:Category ValueConsumption 4,500Gross Investment 1,200Depreciation 655Profits 655Exports 500Compensation of Employees 5240Government Purchases 900Direct Taxes 750Saving 546Imports 550

Find GDP using the

(a) expenditure

(b) income approach.

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Answers (1)
  1. 16 September, 02:41
    0
    Giving the following information:

    Consumption 4,500

    Gross Investment 1,200

    Depreciation 655

    Profits 655

    Exports 500

    Compensation of Employees 5240

    Government Purchases 900

    Direct Taxes 750

    Saving 546

    Imports 550

    A) GDP=C+I+G+/-NX

    GDP = 4,500 + 1,200 + 900 + 500 - 550 = 6,550

    B) GDP Formula = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income

    GDP = 655 + 750 + 655 + 5,240 = 7,300

    Total national income = Sum of rent, salaries, profit.

    Sales Taxes = Tax imposed by a government on sales of goods and services.

    Depreciation = the decrease in the value of an asset.

    Net Foreign Factor Income = Income earn by a foreign factor like the amount of foreign company or foreign person earn from the country and it is also the difference between a country citizen and country earn.
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