D
dextar
Member
I'm anyways bamboozled by the terms used in this question which I coudn't locate anywhre in text. Can anyone please throw light
Suppose the government's national income and product accounts revealed the following information (in Billion units)
Rents 26
Personal saving 4
Corporate income taxes 28
Net exports -15
Undistributed corporate profits 17
Dividends 30
Net foreign factor income 12
Transfer payments 33
Consumption of fixed capital (depreciation) 31
Social Security contributions 39
Compensation of employees 462
Taxes on production and imports 22
Corporate profits 75
Personal taxes 71
Interest 29
Proprietors' income 59
Personal consumption expenditures 525
Gross private domestic investment 110
Government purchases 72
a) Using the data in the table, verify that the income approach and the expenditure approach yield the same measure of GDP.
b) Find NDP by making the appropriate adjustment to GDP.
c) Verify that National Income can be found either by making the appropriate adjustments to NDP or by adding up the appropriate components of income and taxes.
d) Find PI, personal income, by making the appropriate adjustments to NI.
e) Make the appropriate adjustment to PI to find DI, disposable income
The Income method in the text says that income= "Add up the incomes earned before taxes, ie wages, interest, rent and profit .Do not include transfer payments"
I think this statement means w.r.t income statement add up all the pre tax expenses where income statement is
REvenue
-COGS
-WAges
-Rents
-Interests
=Profit before taxes
-taxes
=Profit After tax
Am I correct? Then why should we make use of Properitor's income here in calculting GDP using income method.
Also I coudn't get these terms, NDP and NI
Suppose the government's national income and product accounts revealed the following information (in Billion units)
Rents 26
Personal saving 4
Corporate income taxes 28
Net exports -15
Undistributed corporate profits 17
Dividends 30
Net foreign factor income 12
Transfer payments 33
Consumption of fixed capital (depreciation) 31
Social Security contributions 39
Compensation of employees 462
Taxes on production and imports 22
Corporate profits 75
Personal taxes 71
Interest 29
Proprietors' income 59
Personal consumption expenditures 525
Gross private domestic investment 110
Government purchases 72
a) Using the data in the table, verify that the income approach and the expenditure approach yield the same measure of GDP.
b) Find NDP by making the appropriate adjustment to GDP.
c) Verify that National Income can be found either by making the appropriate adjustments to NDP or by adding up the appropriate components of income and taxes.
d) Find PI, personal income, by making the appropriate adjustments to NI.
e) Make the appropriate adjustment to PI to find DI, disposable income
The Income method in the text says that income= "Add up the incomes earned before taxes, ie wages, interest, rent and profit .Do not include transfer payments"
I think this statement means w.r.t income statement add up all the pre tax expenses where income statement is
REvenue
-COGS
-WAges
-Rents
-Interests
=Profit before taxes
-taxes
=Profit After tax
Am I correct? Then why should we make use of Properitor's income here in calculting GDP using income method.
Also I coudn't get these terms, NDP and NI