ECON 1002 Lecture Notes - Lecture 4: Net Domestic Product, Gross National Product, Factor Cost

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rubyllama377

27 Mar 2018

School

Department

Economics

Course

ECON 1002

Professor

Christina Kelton

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Document Summary

Domestic income refers to the value of production within the domestic territory of a country. Domestic income and domestic product are the same concepts. The term product refers to the value addition while the term income refers to income generated. It is defined as the market value of the output of final goods and services currently produced within the domestic territory of a country during an accounting year. In order to calculate the value of gross domestic product the quantum of goods and services produced is multiplied by the price. Four important features of gross domestic product at market price: gross : the term gross has been pre fixed with domestic product to indicate that latter is inclusive. Because the value of intermediate goods (goods used as raw material) is reflected in the value of final goods: gross domestic product at factor cost(gdp)fc.

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

The following data relates to the market value of economic transactions for the three main sectors of your countrys economy. SECTOR VALUE OF OUTPUT PURCHASES FROM OTHER FIRMS Agriculture 300 160 Manufacturing 200 150 Services 150 120 Required: (i) Compute the gross domestic product (GDP) and explain the method used and why. (2 Marks) (ii) Given that: depreciation = 90, indirect taxes = 70, subsidies = 30, payments to factors of production from abroad = 20, payments to foreign factors = 40. Compute: 1) Gross national product (GNP) at market prices. (1 Mark) 2) Net national product (NNP) at market prices. (1 Mark) 3) Net national product (NNP) at factor cost. (1 Mark) 4) Net domestic product (NDP) at factor cost (1 Mark)

browndog976

What is the market for factors of production?

What is the market for factors of production?
1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages.
What is the money market?
1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.
Who are the three economic actors in the circular flow model?
1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.
How is the national income of an economy determined?
1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.
What is GDP?
1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.

ECON 1002 Lecture Notes - Lecture 4: Net Domestic Product, Gross National Product, Factor Cost

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