In the table below is a list of domestic output and national income figures for
ID: 1191461 • Letter: I
Question
In the table below 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 result you obtain with the different methods should be the same.
1. Using the data below, determine GDP by both the expenditures and income approaches.
2. Then determine the National Income.
3. Adjust National Income (from part b) as required to obtain Personal Income.
4. Adjust Personal Income (from part c) as required to obtain Personal Savings.
Purchases of non-durable goods
$55
State Government purchases
8
Transfer payments
12
New construction
18
Rental Income
14
Capital consumption allowances
27
Social Security contributions
20
Interest Income
13
Proprietors’ income
33
Exports
21
Research and Development
3
Federal Government purchases
56
Dividends
16
Compensation of employees
223
Taxes on Production & Imports
18
Purchases of services
15
Undistributed corporate profits
21
New Plant & Equipment
8
Personal income taxes
47
Corporate income taxes
19
Corporate profits
56
Local Government purchases
4
Net private domestic investment
33
Net foreign factor income
4
Imports
10
Purchases of durable goods
171
Changes in inventories
4
Purchases of non-durable goods
$55
State Government purchases
8
Transfer payments
12
New construction
18
Rental Income
14
Capital consumption allowances
27
Social Security contributions
20
Interest Income
13
Proprietors’ income
33
Exports
21
Research and Development
3
Federal Government purchases
56
Dividends
16
Compensation of employees
223
Taxes on Production & Imports
18
Purchases of services
15
Undistributed corporate profits
21
New Plant & Equipment
8
Personal income taxes
47
Corporate income taxes
19
Corporate profits
56
Local Government purchases
4
Net private domestic investment
33
Net foreign factor income
4
Imports
10
Purchases of durable goods
171
Changes in inventories
4
Explanation / Answer
National Income = GDP as per income approach
Personal Income = Compensation + Dividends + Interest Income + Rental Income = $266 billion.
Personal Savings = Personal Income – Personal Income Taxes = 266 – 47 = $219 billion
Expenditures Amount Incomes Amount Purchases of non-durable goods 55 Rental Income 14 State Government purchases 8 Capital consumption allowances 27 Interest Income 13 New construction 18 Proprietors’ income 33 Taxes on production and imports 18 Research and Development 3 Federal Government purchases 56 Corporate profits 56 Purchases of services 15 Net foreign factor income 4 New Plant & Equipment 8 Compensation to Employees 223 Local Government purchases 4 Net private domestic investment 33 Purchases of durable goods 171 Changes in inventories 4 Net Exports 11 GDP as per Expenditure approach 386 GDP as per Income approach 388