ECON 20 Lecture Notes - Lecture 10: Disposable And Discretionary Income, National Accounts, Fixed Capital

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rosebuffalo981

18 Aug 2020

School

Irvine Valley College

Department

Economics

Course

ECON 20

Professor

mitton

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Document Summary

Net domestic product i consumption of fixed capital (deprecation) = ndp. Shows us the net domestic product by subtracting the cost of production from the gdp. Subtract net foreign factor income (income americans get from supplying resources abroad, which would be taken out) Consumption of fixed capital (equipment costs that go into production of product, can be written of in taxes since it lowers income) Gdp is a dollar measure of production. Based on prices that prevailed when output was produced. Increase in real gdp or real gdp per capita over some time period. Growth in u. s. real gdp per capita. Began with the industrial revolution in late 1700s. Starting date main cause of worldwide differences in living standards. Key factors that ensure a nations ability to sustain growth. Necessary if a society wants constant innovations and advancements. Increases the quality of products that are designed and produced within the country. Increases in quantity and quality of natural resources.

Related Questions

5. The income approach

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

	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

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.

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

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.

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

taupeweasel18

Using the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All figures are in billions. Category Value Compensation of employees $196.2; U.S. exports of goods and services 19.8; Consumption of fixed capital 11.8; Government purchases 59.4; Taxes on production and imports 14.4; Net private domestic investment 52.1; Transfer payments 13.9; U.S. imports of goods and services 16.5; Personal taxes 40.5; Net foreign income 2.2; Personal consumption expenditures 219.1; Statistical discrepancy 0.0;

Instructions: Round your answers to one decimal place.

a. GDP = $ billion

b. NDP = $ billion

c. National Income = $ billion

amethystsnail733

Personal consumption expenditures	$245
Net business transfer payments	9
Net factor income from the ROW	4
Transfer payments	12
Rents	14
Statistical discrepancy	8
Consumption of fixed capital (depreciation)	27
Social Security contributions	20
Net Interest	13
Proprietors’ income	33
Net exports	11
Dividends plus personal interest income	16
Compensation of employees	223
Indirect Taxes minus subsidies	18
Personal taxes	26
Corporate profits	56
Government purchases	72
Net private domestic investment	33
Surplus of government enterprises	-9

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 makeup NI.

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

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

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ECON 20 Lecture Notes - Lecture 10: Disposable And Discretionary Income, National Accounts, Fixed Capital

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