ECON 1110 Lecture Notes - Lecture 4: Income Approach, Factor Cost

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jadekangaroo201

2 Feb 2016

School

University of Windsor

Department

Economics

Course

ECON 1110

Professor

Peter Miller

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Document Summary

Gdp = c + i + g + x m. Consumption (c: household expenditures on all goods and services. Durable goods (lasts more than 3 years) Non-durable goods (life span of less than 3 years) Services: expenditures on the production of goods not for current. Government expenditures (g: net investment = gross investment depreciation, all government expenditures on currently produced goods and services excluding transfer payments. Net exports (x-m: exports (x) less imports (m, exports, imports. The value of all goods and services sold to firms, households, and governments in other countries. Value of all produced goods and services purchased in other countries: income approach. Gdp = factor incomes + indirect taxes + depreciation. Factor incomes: wages and salaries, interest, business profits, net domestic income. Non-factor payments: indirect taxes less subsidies, depreciation. Depreciation: compute for gdp using expenditure approach. Gross investment = net private investment + depreciation. Gdp = personal consumption + gross investment + government purchases + net exports.

Related Questions

Table 1.1.5. Gross Domestic Product
Line		2015		2016
Line		III	IV	I	II
1	Gross domestic product	18141.9	18222.8	18281.6	18436.5
2	Personal consumption expenditures	12356.9	12438.8	12498	12695.1
3	Goods	4043	4038.1	4008.7	4086
4	Durable goods	1364.7	1371.8	1366.6	1390.4
5	Nondurable goods	2678.4	2666.3	2642	2695.6
6	Services	8313.9	8400.6	8489.3	8609
7	Gross private domestic investment	3072.1	3059.9	3036.8	2973.6
8	Fixed investment	2995.3	2997.2	2994.8	2992.2
9	Nonresidential	2331.5	2311.3	2292.4	2294
10	Structures	508.5	487.8	486	479.3
11	Equipment	1099.7	1092.6	1066.3	1056.6
12	Intellectual property products	723.3	730.9	740.1	758.2
13	Residential	663.8	685.9	702.4	698.2
14	Change in private inventories	76.8	62.7	41.9	-18.6
15	Net exports of goods and services	-523.4	-520.9	-507.4	-495.5
16	Exports	2259.1	2211.7	2179	2206.8
17	Goods	1495.6	1448.3	1410.9	1437.8
18	Services	763.5	763.4	768.1	769
19	Imports	2782.5	2732.6	2686.3	2702.3
20	Goods	2284.1	2235	2185.7	2199.1
21	Services	498.4	497.7	500.7	503.2
22	Government consumption expenditures and gross investment	3236.3	3245	3254.3	3263.4
23	Federal	1225	1234	1233.8	1239.2
24	National defense	729.3	735.6	731.4	729.3
25	Nondefense	495.7	498.4	502.4	509.9
26	State and local	2011.3	2011	2020.5	2024.1

Table 1.1.6. Real Gross Domestic +A1:F26Product, Chained Dollars
Line		2015		2016
Line		III	IV	I	II
1	Gross domestic product	16454.9	16490.7	16525	16570.2
2	Personal consumption expenditures	11255.9	11319.3	11365.2	11487.4
3	Goods	3932.6	3953.4	3964.7	4033.4
4	Durable goods	1512.4	1527.3	1524.9	1561.3
5	Nondurable goods	2451.3	2458.4	2471.1	2505.6
6	Services	7327.2	7369.8	7403.9	7460.5
7	Gross private domestic investment	2882.2	2865.4	2841.5	2769.9
8	Fixed investment	2794.5	2793.3	2786.7	2769
9	Nonresidential	2217.5	2198.8	2179.7	2174.8
10	Structures	453.4	435.1	435.2	425.8
11	Equipment	1085.7	1078.6	1052	1042
12	Intellectual property products	683.1	690.7	697.1	711.7
13	Residential	573.7	589.5	600.7	588.8
14	Change in private inventories	70.9	56.9	40.7	-12.4
15	Net exports of goods and services	-547.1	-566.6	-566.3	-562
16	Exports	2120.4	2105.8	2102	2108.1
17	Goods	1440.7	1423.8	1424.1	1430.3
18	Services	679.3	681.1	677.3	677.4
19	Imports	2667.6	2672.4	2668.2	2670.1
20	Goods	2197.4	2201.4	2194.1	2194.3
21	Services	468.2	469	471.9	473.6
22	Government consumption expenditures and gross investment	2894.4	2901.7	2913.2	2902.1
23	Federal	1112.7	1123	1118.7	1117.8
24	National defense	669	676.3	670.9	665.7
25	Nondefense	443.1	446.2	447.2	451.4
26	State and local	1779.9	1777.1	1792.6	1782.6
27	Residual	-49.2	-49.6	-46.5	-52.6

1.Why was the nominal GDP greater than real GDP in each of those quarters?

2.What was the percentage change in Nominal GDP for the most recent quarter compared to the previous quarter? What was the percentage change in real GDP for the two quarters?

3.What accounts for the difference in the two percentages?

orangewolf175

1. Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.

2. Suppose a consumer buys 10 units of good X and 20 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005-2007. Assume that these two goods constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year. Comment on the inflation picture for these years.

Year	Good X	Good Y
2005	$3	$6
2006	4	7
2007	4.5	7.5

3. Using the expenditure approach, calculate GDP using the following data.

Item	Amount in dollars (billions)
Consumption	7,600
Consumption of Durable Goods	1,600
Consumption of Non Durable Goods	2,800
Consumption of Services	3,200
Investment	2,750
Fixed Investment	1,000
Government purchases of Goods & Services	1,675
Government Transfer Payments	450
Exports	750
Imports	1,600
GDP Equals

4. a. What is the importance of measuring per capita GDP?

b. Why nominal GDP can be misleading?

emeraldkangaroo112

Assume that the equations below describe the expenditures within a particular macroeconomy and that these equations conform to the assumptions we've made in the lecture regarding the fixed price level Aggregate Expenditure model. All values for expenditure and income are dollar amounts, but for simplicity, we've dropped the $ below.

C = 0.8(DI) + 1000	C = Consumption expenditure, DI = Disposable Income
I = 2000	I = Investment expenditure
G = 1000	G = government expenditure
X = 1600	X = spending on exports
M = 1800	M = spending on imports
DI = Y - T	Y = real GDP, T = tax revenues/>
T = 1000
Yp = 12000	Yp = Potential GDP

Given the equations above, we can describe the GDP, government budget, and net exports in this economy. Select three characteristics from the list below which accurately describe this economy. Note that there is no partial credit on this question. I.e., your answer will either be all correct, or all wrong.

	a.	inflationary gap
	b.	recessionary gap
	c.	no output gap
	d.	government budget surplus
	e.	government budget deficit
	f.	balanced government budget
	g.	trade deficit
	h.	trade surplus
	i.	net exports of zero

pucearmadillo585

ECON 1110 Lecture Notes - Lecture 4: Income Approach, Factor Cost

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