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CLASS EXERCISES FOR MEASURING NATIONAL OUTPUT AND INCOME
1. Using the following data, calculate the GDP and NDP. Calculate under closed and
open economy.
Gross Investment
Exports
Consumption
Government Purchases
Consumption of Fixed Capital
Imports
$46
9
180
84
52
12
2. Using the following data, derive GDP, NDP, National Income, Personal Income,
Personal Disposal Income, GNP, and NNP. Which economic indicator is higher, GDP or
GNP? Why?
Personal Consumption Expenditures
Interest
Corporate Profit
Government Purchases
Depreciation
Rent
Gross Private Domestic Investment
Compensation of Employees
Factor Incomes from Overseas
$490
40
70
150
40
20
50
420
30
Indirect Business Taxes
Imports
Proprietor’s Income
Income Tax
Income Earned but not received
Income Received but not earned
Factor Incomes to Overseas
Exports
70
30
55
100
60
70
25
50
3. Calculate the GDP using the value added method. The following tables are given:
The Stage of Production
(Firm)
1. Oil Drilling
2. Refining
3. Shipping
4. Retail Sale
Total Value
Sales Value
(Rupiah)
50000
70000
-
The Cost of Intermediate
Goods (Rupiah)
0
-
Value Added(Rupiah)
100000
150000
-
4. The table gives a simplified process by which wheat is transformed into a donut. What
is the value added by Miller?
1
5. Consider an open economy with expenditure totals given by
C
I
G
NX
F
N
T
a.
b.
c.
d.
e.
= $1200 billion
= 400
= 300
= -100
= 200
= 100
= 400
(Consumption)
(Investment)
(Government Spending)
(Net Exports)
(Government Transfers)
(Interest on the Government Debt)
(Taxes)
What is GNP?
What is private saving?
What is government saving?
What is the rest of the world saving?
What is the total saving? Show that it equals investment
6. If investment = $80 million, saving = $50 million, and government expenditure = $90
million, how much are taxes?
7. If consumption expenditures are $500 million, spending on fixed investment is $100
million, imports are $50 million, exports are $55 million, government purchases of goods
and services is $200 million, which $20 million of is spent on highways, then GDP is ___
million.
8. Using the following data, calculate the GDP.
Consumption = $2000
Transfer Payments = $340
Imports = $220
Wages = $1000
Exports = $180
Investment = $600
Government purchases = $500
9. Given the following information:
Consumption of Fixed Capital
Indirect Business Taxes
Compensation of Employees
Rents
Interest
Proprietor’s Income
Corporate Income Taxes
Dividends
Undistributed Corporate Profits
Personal Consumption Expenditures
Gross Private Domestic Investment
Government Purchases
Net Exports
Net Foreign Factor Income Earned in the US
438
350
2347
14
287
242
86
83
128
2582
669
815
-78
13
2
Calculate:
a. Gross Domestic Product (GDP)
b. Net Domestic Product (NDP)
c. National Income (Y)
10. GRONINGEN is an open economy with the following information:
Consumption
Investment
Government Expenditure
Tax
Exports
Imports
: C = 200 + 0.8 Yd
: I = 200
: G = 150
: T = 40
: X = 80
: M = 30 + 0.2Y
a. Determine the equilibrium level of national income.
b. Determine the savings amount.
c. If the full employment national income is 1500, what is the macroeconomic
problem that might be faced by GRONINGEN?
11. The following information is given:
Personal Consumption Expenditures
Interest
Corporate Profit
Government Purchases
Depreciation
Rent
Gross Private Domestic Investment
Compensation of Employees
Factor Incomes from Overseas
$500
40
85
150
45
25
70
400
30
Indirect Business Taxes
Imports
Proprietor’s Income
Income Tax
Income Earned but not received
Income Received but not earned
Factor Incomes to Overseas
Exports
105
30
50
120
80
90
50
80
Using the following information, calculate the GDP (using the expenditure approach),
NDP, National Income, Personal Income, Disposable Income, GNP, and NNP. Which
economic indicator is higher, GDP or GNP? Why?
12. The following information is provided:
Indirect taxes
Exports
Depreciation
Subsidies
Gross investment expenditure
Income paid abroad
Consumption expenditure
Government expenditure
$ million
7.8
17.0
9.2
4.1
32.2
10.7
75.0
27.3
3
Income from abroad
Imports
10.1
14.5
a. Calculate the Gross Domestic Product (GDP) and Gross National Product (GNP)
and Net Domestic Product (NDP) at market price.
b. Calculate the GDP and GNP at factor cost.
13. Given the table below, the equilibrium level of GDP is:
Income
$1500
$1550
$1600
$1650
$1700
Consumption
1350
1395
1440
1485
1530
Investment
140
140
140
140
140
Net Exports
20
20
20
20
20
14. Given the following data, calculate the equilibrium level of income:
Y=C+I+G
C = 200 + 1/2Yd
I = 200
G = 250
T = 200
15. The following is the table for Country A:
Year
1990
1991
1992
1993
1994
Units of output
8
10
17
18
20
Price per unit
$2
3
4
5
8
a. If 1990 is the base year, the GDP deflator for 1993 is …
b. In 1994, nominal GDP would be
c. If the real GDP in a year was $3668 billion and the price index was 112, then
nominal GDP in that year was approximately
16. A typical family in Jakarta, buys only oranges and pens. In the base year, it bought
400 oranges at $1.00 each and 800 pens at $0.75 each. This year, a family buys 500
oranges at $1.50 each and 850 pens at $1.00 each. The CPI this year is_______
4
17. Use the information in the table to calculate nominal GDP in 1995 and real GDP in
1996.
18. Use information in the table plus the fact that indirect taxes less subsidies are $10
billion and depreciation is $25 billion to calculate the value of GDP.
19. Suppose that nominal GDP per person was $17,000 in 1996, the 1990 GDP deflator
was 100, and the 1996 GDP deflator was 90. The approximate real GDP per person in
1996 was ______
20. The following information is given:
Year
1
2
3
Indo (Real GDP)
$2000
$2100
$2200
Spain (RGDP)
$150000
$152000
$154000
Indo (Population)
$200
$202
$210
Spain (Pop.)
500
505
508
a. What is the per capita GDP for Spain in Year 3?
21. Suppose an economy’s real GDP is $30,000 in year 1, and $31,200 in year 2. Assume
that population was 100 in year 1 and 102 in year 2.
a. What is the growth rate of its real GDP?
b. What is the growth rate of GDP per capita?
22. In a three-sector economy, the following conditions prevail
Consumption function
Tax function
Investment function
Government expenditure
:
:
:
:
C = 30 + 0.8Yd
T = 0.25Y
I = 20
G = 22
Derive the consumption and saving functions after tax.
5
ANSWERS
1.
Under Open Economy
GDP
NDP
= C + I + G + NX
= $180 + $46 + $84 + ($9 - $12)
= $307
= GDP – Consumption of Fixed Capital
= $307 - $52
= $255
Under Closed Economy
GDP
NDP
=C+I+G
= $180 + $46 + $84
= $310
= GDP – Consumption of Fixed Capital
= $310 - $52
= $258
2. Expenditure Approach (Demand Approach)
GDP
= C + I + G + NX
= $490 + 50 + 150 + (50-30)
= $710
NDP
= GDP – Depreciation
= $710 - $40
= $670
National Income = Employees Compensation (Wages and Salaries) + Corporate Profits +
Sole Proprietor’s Income + Net Interest Income + Rental Income
= $420 + 70 + 55 + 40 + 20
= $605
Personal Income = Salaries & Wages + Interest Income + Rental Income + Dividend
Income + Proprietor’s Income + Transfer Payments
OR
Personal Income = National Income – (Corporate Profits – Dividends) – Social Security
or Insurance Taxes + Transfer Payments
OR
Personal Income = National Income – Income earned but not received + Income received
but not earned
= $605 - $60 + $70
= $615
6
Personal Disposable Income = Personal Income – Income Tax
= $605 - $100
= $515
Income Approach (Supply Approach)
GDP = National Income + Depreciation + Indirect Business Taxes + Net Factors
Payments (factors incomes/payments to overseas – factor incomes/payments from
overseas)
= $605 + $40 + $70 + ($25 - $30)
= $710
GNP = GDP – Net Factor Payments to the rest of the world
= $710 – ($25 - $30)
= $715
Since the net factor payments to the rest of the world is negative, therefore GDP<GNP.
3. The computations are as followed:
The Stage of Production
(Firm)
1. Oil Drilling
2. Refining
3. Shipping
4. Retail Sale
Total Value
Sales Value
(Rupiah)
50000
70000
170000
320000
610000
The Cost of Intermediate
Goods (Rupiah)
0
50000
70000
170000
290000
Value Added(Rupiah)
50000
20000
100000
150000
320000
Therefore, the total GDP is Rupiah 320000.
4. The value added by Miller is 40 cents – 25 cents = 15 cents or $0.15.
5. a.
b.
c.
d.
e.
GNP = C + I + G + NX = 1200 + 400 + 300 -100 = $1800 billion
Private saving = Disposable Income (PDI) – Consumption
Disposable Income = GNP + Government Transfers + Interest on the Government
Debt - Taxes
Private Savings
= (Y + F + NX – T) – C
= (1800 + 200 + 100 – 400) – 1200
= $500 billion.
Government saving = Taxes – Government Transfers – Interest on the
Government Debt – Government Spending.
Sg
= T – F – N – Gs
= 400 – 200 -100 -300
= -$200 billion
Rest of the world saving = -Net exports
Using the Sr to denote rest of world saving, Sr
= -X
= $100 billion
Total saving = Private saving + Government saving + Rest of the world saving
S = 500 – 200 + 100 = $400 billion, which equals investment.
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6.
I+G+X=S+T+M
$80 + $90 = $50 + T
T = $120
7.
GDP
8.
GDP = C + I + G + NX
= $2000 + $600 + $500 + ($180 - $220)
= $3100 - $40
= $3060
9.
a. GDP
= C + I + G + NX
= 2582 + 669 + 815 + (-78)
= $3988
b. NDP
= GDP – Depreciation
= 3988 – 438
= $3550
c. NI
= Compensation of Employees + Corporate Profits (corporate
income taxes + dividends + undistributed corporate profits) + Sole
Proprietor’s Income + Interest Income + Rental Income
= 2347 + 297 (128 + 83 + 86) + 242 + 287 + 14
= $3187
= C + I + G + NX
= 500 + 100 + 200 + 5
= $805
10. a. Determine the equilibrium level of national income.
Y
Y
Y
1.2Y
0.4Y
Y
= C + I + G + NX
= (200 + 0.8Yd) + 200 + 150 + (80 – (30 + 0.2Y))
= (200 + 0.8 (Y – 40)) + 350 + 80 – 30 – 0.2Y
= 200 + 0.8Y – 32 + 400
= 568
= $1420
Yd
= Y – tax
b. Determine the savings amount.
Y
$1420
1420
1420
S
S
=C+S
= (200 + 0.8 (1420 – 40)) + S
= 200 + 1104
= 1304 + S
= 1420 – 1304
= 116
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c. If the full employment national income is 1500, what is the macroeconomic
problem that might be faced by GRONINGEN?
Since the GDP is $1420 and the full employment national income is 1500, thus, from
here we can find that the economy is experiencing an underemployment of economic
resources which in turn reduces the economic growth.
11. Expenditure Approach (Demand Approach)
GDP
= C + I + G + NX
= $500 + 70 + 150 + (80-30)
= $770
(3 marks)
NDP
= GDP – Depreciation
= $770 - $45
= $725
(1.5 marks)
National Income = Employees Compensation (Wages and Salaries) + Corporate Profits +
Sole Proprietor’s Income + Net Interest Income + Rental Income
= $400 + 85 + 50 + 40 + 25
= $600
(3 marks)
Personal Income = National Income – Income earned but not received + Income received
but not earned
= $600 - $80 + $90
= $610
(1.5 marks)
Personal Disposable Income = Personal Income – Income Tax
= $610 - $120
= $490
(1.5 marks)
GNP
= GDP – Net Factor Payments to the rest of the world
= $770 – ($50 - $30)
= $750
(1.5 marks)
GDP
= NI + IBT + CCA + NFP
= $600 + $105 + $45 + 20
= $770
(1.5 marks)
Since the net factor payments to the rest of the world is positive, therefore GDP>GNP.
(1 mark)
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12. The answers are as followed:
GDP
= C + I + G + NX
= $137 million
GNP
= GDP – Net Foreign Income
= $136.4 million
NDP
= GDP – Depreciation
= $127.8 million
GDP at Factor cost and GNP at factor cost
GDP at factor cost
= GDP market price + subsidies – indirect taxes
= $133.3 million
GNP at factor cost
= GDP at factor cost – Net foreign income
= $132.7 million
13. The equilibrium level of GDP is $1600
14. C = 200 + 1/2Yd
C = 200 + ½ (Y – 200)
C = 200 + 1/2Y – 100
C = 100 + 1/2Y
Yd = Y - tax
Y=C+I+G
Y = (100 + 1/2Y) + 200 + 250
1/2Y = 550
Y = 550/1/2
Y = 1100
15. a. GDP Deflator = Nominal GDP/Real GDP x 100
= Current Period Price/Base Period Price x 100
= 40 ($5 x 8 units) / 16 ($2 x 8 units) x 100
= $250
b. Nominal GDP in 1994 = $8 x 20 units = $160
c. GDP Deflator (Price Index) = (Nominal GDP / Real GDP) x 100
Nominal GDP = (GDP Def. x Real GDP)/100
= 112 x $3668 / 100
= $4108.16
16. The Consumer Price Index (CPI) is:
Base Year
=
Oranges ($1 x 400 units) = $400
10
Pens ($0.75 x 800 units) = $600
Total Expenditure
= $1000
Current Year =
Oranges ($1.50 x 500 units) = $750
Pens ($1.00 x 850 units) = $850
First step, adjust the units (quantity):
Current Year:
Oranges ($1.50 x 400 units) = $600
Pens ($1.00 x 800 units) = $800
Total Expenditure
= $1400
Therefore, CPI
= Current Year/ Base Year
= $1400/$1000 x 100
= 140
17. Nominal GDP in 1995
Real GDP in 1996
= (Real GDP 1995 x GDP Deflator 1995)/100
= (55 x 120)/100
= $66 billion
= Nominal GDP/GDP Deflator x 100
= 80/125 x 100
= $64 billion
18.
The value of GDP in 1996 = NI + Depreciation + IBT + Net Factor Payments
NI = Compensation of Employees + Net Interest and Rental Income + Corporate Profits
+ Proprietor’s Income
NI = 110 + 15 + 20 + 15
NI = $160
GDP = $160 + $25 + $10 billion
GDP = $195 billion
19. 1996 GDP Deflator = Nominal GDP 1996/Real GDP 1996
90 = 17000/Real GDP 1996
Real GDP in 1996 = 17000/90 = $18,889.
20. GDP Per Capita for Spain in Year 3 = GDP/Population = $154,000/508 = 303.149.
a. Growth rate of real GDP = $31,200 - $30,000 / $30,000 = 4 percent.
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b. GDP per capita in year 1 = $30,000/100 = $300
GDP per capita in year 2 = $31,200/102 = $305.88
Growth rate of GDP per capita = $305.88 - $300 / $300 = 1.96%
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