šŸ·ļø LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION ā†’
Log in
HomeClass Notes1,200,000CA670,000

ECN 204 Lecture Notes - Lecture 5: Economic Indicator, Fixed Capital, Factor Cost

14 views2 pages
School
Ryerson University
Department
Economics
Course
ECN 204
Professor
Natalia B

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Gross operating surplus - gross profits of corp, gov, households, non-profits. Gross mixed income - gross profits of farmers, non-incorp business. Taxes less subsidies on production - factors of prod such as land, labor, capital. Taxes less subsidies on products and imports - sales taxes such as hst, gst, pst. Adding up domestic income - add up all income to determine net domestic income at factor cost. All income earned by can-supplied factors of production as wages, rent, interest, and profit. Capital consumption allowance - depreciation change against gross investment = allowance for capital goods consumed in producing year"s gdp. Consumption of fixed capital included in gross value of of output, not included in national income, must be added to balance economy"s expenditures. When net investment is positive, production capacity increases. Personal income is all income received by households. Disposable income is all income less personal taxes.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ECN 204
Final Exam
Study Guide
ECN 204 Study Guide - Midterm Guide: Workforce Productivity, Core Inflation, Equilibrium Level
olivehippopotamus827
ECN 204 Chapter Notes - Chapter 5: Gdp Deflator, Market Basket, Consumer Spending
limecockroach746
ECN 204 Lecture Notes - Lecture 3: Capital Outflow, Opportunity Cost, Imperial Bank Of Canada
indigoguinea-pig980

Related Questions

Ā 

5. The income approach

The following table shows macroeconomic data for a hypothetical country. All figures are in billions of dollars.

Ā  Billions of Dollars
Gross private investment (investment) 120
Capital consumption allowance (depreciation) 35
Exports 60
Imports 55
Government purchases 130
Personal consumption expenditures (consumption) 325
Indirect business taxes 20
Social insurance taxes 33
Corporate profit taxes 13
Undistributed corporate profits 4
Transfer payments 70
Personal taxes 90
Compensation of employees 380
Corporate profits 120
Rental income (of persons) 25
Net interest 40
Proprietors' income 5
Income earned from the rest of the world 90
Income earned by the rest of the world 45

Ā 

National income can also be calculated based on disposable income. Use the following table to derive personal income and national income (in billions of dollars). Specify what needs to be added to disposable income to arrive at personal income, and explain how personal income should be adjusted to find national income.

Ā  Billions of Dollars
Disposable income Ā  500
Plus Ā  +
Personal income Ā  =
Plus social insurance taxes Ā  + 33
Plus Ā  +
Plus undistributed corporate profits Ā  + 4
Minus Ā  -
National income Ā  =
Ā 

Ā 

National income is the total amount earned by the citizens of a country, while gross domestic product is the total value of goods and services produced within a country. To determine the gross domestic product, you have to make some adjustments to national income. Use the following table to derive gross domestic product and, as part of the process, net domestic product (NDP) (in billions of dollars). Again, specify what should be added to and subtracted from national income to arrive at the net domestic product, and what should be added to the net domestic product to arrive at the gross domestic product.

Ā  Ā  Billions of Dollars
National income Ā  Ā 
Plus indirect business taxes Ā  + 20
Plus Ā  +
Minus Ā  -
Net domestic product (NDP) Ā  =
Plus Ā  +
Gross domestic product (GDP) Ā  =

Question 1 Gross domestic product (GDP) measures the economy's production of

A) final goods and services.

B) intermediate goods.

C) consumer goods and services.

D) capital goods.

Question 2 Because GDP is measured in dollars per year, GDP is called a

A) stock.

B) flow.

C) cycle.

D) chain.

Question 3 Which of the following would not be included in the gross private domestic investment (I) category of GDP?

A) A retailer's additions to its inventories.

B) A bakery's purchase of a new oven.

C) A trader's purchase on NASDAQ stocks.

D) Newly built residential construction.

Question 4 Which of the following government payments would be included in the government consumption expenditures and gross investment (G) category of GDP?

A) A firefighter's monthly paycheck.

B) A retired grandmother's Social Security check.

C) A retired colonel's veteran's benefits.

D) A laid-off auto worker's unemployment conpensation check.

Question 5 The largest component in the income approach to measuring GDP is

A) compensation of employees.

B) rents.

C) profits.

D) net interest.

Question 6 Which approach to calculating GDP attempts to measure employee compensation, rents, profits, and net interest?

A) The circular-flow approach.

B) The product-market approach.

C) The income approach.

D) The expenditure approach.

Question 7 In recent years, people have benefited from greater amounts of leisure time. This trend

A) has caused GDP to rise.

B) has caused GDP to fall.

C) made GDP fluctuate randomly.

D) is not accounted for in the GDP statistic.

Question 8 National income (NI) is calculated by adjusting GDP for

A) depreciation of capital.

B) investment and net exports.

C) Social Security insurance contributions and transfer payments.

D) corporate and personal income taxes.

Question 9 If an economy's real GDP has increased, we can conclude that the economy

A) is inflationary.

B) has increased its production.

C) suffers from recession.

D) needs a tax cut.

Question 10 In the circular flow model, investment, government spending, and exports are classified as

A) injections.

B) leakages.

C) transfers.

D) consumption expenditures.

To the right is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approaches. The results you obtain with the different methods should be the same.


1. compensation of employees- $194.2
2. U.S exports of goods and services- $17.8
3. consumption of fixed capital- $11.8
4. government purchases- $59.4
5. taxes on production and imports- $14.4
6. net private domestic investment- $52.1
7. transfer payments- $13.9
8. U.S imports of goods and services- $16.5
9. personal taxes- $40.5
10. net foreign factor income- $2.2
11. personal consumption expenditures- $219.1
12. statistical discrepancy- $0

a. Using the above data, determine GDP by both the expenditures and the income approaches. Then determine NDP.

b. Now determine NI in two ways: first, by making the required additions or subtractions from NDP; and second, by adding up the types of income and taxes that make up NI.

c. Adjust NI (from part b) as required to obtain PI.

d. Adjust PI (from part c) as required to obtain DI.