Question

Using the data below, compute GDP via the expenditure and income approach. Category Millions of US$ corporate profits 1200 gross private domestic investment 2000 consumption of nondurable goods 3000 exports 1200 proprietors' income 900 taxes, imports, and misc. adjustments 800 consumption of services 4000 net interest 550 compensation of employees 7000 capital consumption allowance 1500 imports 1800 rental income 150 government spending 2000 consumption of durable goods 1000

Answer 1

Answer:

The GDP via the expenditure and income approach is $13,700 and $9,800 respectively

Explanation:

The computation of GDP via Expenditure approach  is shown below:

GDP = Consumption Expenditure + Investment expenditure + Government spending + net export  ( export - import)

In brief,

= Consumption of non-durable goods + Consumption of services + Consumption of durable goods + capital consumption allowances + Gross private domestic investment + taxes, imports and misc. adjustments + Government spending + Export -Import

= ($3,000 + $4,000 + $1,000 + $1,500) + ($2,000) + ($800 + $2,000) + ($1,200 - $1,800)

= $9,500 + $2,000 +$2,800 - 600

= $13,700

The computation of GDP via Income method  is shown below:

GDP = Corporate profits + Proprietors income + net interest + compensation of employees + rental income

= $1,200 + $900 + $550 + $7,000 + $150

= $9,800