Part 2: Income Approach to Calculating GDP (weight 25% of the assignment grade)
ID: 1131677 • Letter: P
Question
Part 2: Income Approach to Calculating GDP (weight 25% of the assignment grade) Complete the following exercise:
Go to http://www.bea.gov/
Visit the Bureau of Economic Analysis website at www.bea.gov. From the drop-down menu under “Data,” click on “by Economics Account.” Then click on “National,” “Gross Domestic Product, and “Full Release and Tables.” Use table 7 (Relation of Gross Domestic Product, Gross National Product, and National Income) and table 8 - Personal Income and Its Disposition.
1. Create the table that contains the following information for the last year quarterly. Omit the intermediate lines found in Tables 7 & 8 on the web site.
Gross domestic product
Gross national product
Net national product
National income
Personal income
1) What is the difference between gross domestic product (GDP) and gross national product (GNP)? What is the difference in what GDP measures compared to GNP?
2) Based on the table, what calculations must you make to determine GNP from GDP?
3) What is national income (NI)? What does NI measure?
4) Which was higher in this year, GNP or NI? By how much?
5) What calculations must you make to determine NI from GNP?
6) NI is composed of a number of categories. What category makes up the largest portion of NI?
7) Please analyze and discuss the significance of the data that you received for this Data exercise. Reflect on what you have learned from this exercise
Explanation / Answer
The following table gives the information about Gross domestic product, Gross national product, Net national product, National income and Personal income for last year quarterly
What is the difference between gross domestic product (GDP) and gross national product (GNP)?
Ans) When the value of all goods and services which are produced within the territory of country by any citizen or corportaion of any country is calculated it is GDP but when the value of those goods and services which are also produced by all citizens or corporations of the country in any other country is added and the value of those goods produced by citiizens or corporations of other country into the territory of the country is deducted to/from GDP then it becomes GNP.
What is the difference in what GDP measures compared to GNP?
Ans) GDP measures the avlue of all goods produced within the territory or boundary of a country whereas GNP measures the value of all goods produced by all citizens and corporations of the country in any territory of any other country.
Based on the table, what calculations must you make to determine GNP from GDP?
Ans) To determine GNP from GDP it is necessary to add income receipts of the nationals froom rest of the world and also deductions of income paid to rest of the world is made from GDP.
What is national income (NI)? What does NI measure?
Ans) National income is the value of all goods and services produced by a country within a year. It measures how much value has been created in form of goods and services by a country within a given year.
Which was higher in this year, GNP or NI? By how much?
Ans) GNP was higher by 20677 - 17464.4 = 3212.6
What calculations must you make to determine NI from GNP?
Ans) From GNP it is necessary to deduct depreciation (consumption of fixed capital) to make gross as net and also to dedcut statistifal discrepancy to estimate NI.
NI is composed of a number of categories. What category makes up the largest portion of NI?
Ans) Compensation of employees is the largest portion of NI.
Items Q2 2018 (billions of dollars) Gross Domestic Product 20,411.90 Gross National Product 20,677 Net National Product 20677-3255.2=17421.8 National Income 17,464.40 Personal income 17,497.60