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Lesson 6 – Review Day Calculate the GDP, NDP, NI, PI, DI, and Savings using BOTH approaches!!! Transfer payments 16 Government purchases 80 Personal taxes 38 Corporate income tax Taxes on production and imports Social security contributions Undistributed corporate profits Proprietors income 28 Compensation of employees Personal consumption expenditures Consumption of fixed capital 258 Rents 10 US exports 14 Corporate profits 70 Interest 12 Dividends 23 Imports to US Gross private domestic investment Net foreign factor income 17 Statistical discrepancy 35 15 8 19 25 322 4 63 10 **please note – expenditure and income approach will NOT be the same!!! Expenditure Approach Answers: GDP = $462 NDP = $458 NI = $433 PI = $379 DI = $341 S = $19 Income Approach Answers: GDP = $419 NDP = $415 NI = $390 PI = $336 DI = $298 S =$ -24 The following table shows the price of a specific stereo receiver for a five-year period. Using year 3 as a base year, calculate the price index for each year. Year 1 2 3 4 5 Price 88 100 120 132 140 Price Index 73.3 83.3 100 110 116.7 The following data show nominal GDP and the appropriate price index for several years. Compute real GDP for each year and indicate whether you have “inflated” or “deflated” nominal GDP when finding real GDP. All GDP numbers are in billions. Year 1 2 3 4 5 6 Nominal GDP 117 124 143 149 178 220 Price Index 120 104 85 96 112 143 Real GDP 97.5 119.2 168.2 155.2 158.9 153.85 Inflated or Deflated D D I I D D *What is the inflation rate between years 5 and 6? 27.68% ((143-112)/112) x 100