Question

The income approach The following table shows macroeconomic data for a hypothetical country. All figures are in billions of dollars.
Billions of Dollars
Gross private domestic investment $2,300
Depreciation $1,987
Exports $3,120
Imports $200
Government purchases of goods and services $4,521
Personal consumption expenditures $6,300
Indirect business taxes and misc. items $1,341
Income received from other countries $1,118
Income paid to other countries $1,022
Compensation of employees (wages) $8,174
Corporate profits $1,895
Rental income $365
Net interest $903
Proprietors’ income $1,343
If you calculate GDP by adding together the final demands of consumers, business firms, the government, and foreigners (i.e., using the expenditure approach), GDP for this economy is ________$ billion. Given this information, the statistical discrepancy between national income and net national product, obtained when GDP is measured using the expenditure approach, is________ $ billion.

Answer 1

Answer:

A. $16,041 billion

B. $33 billion

Explanation:

A. Calculation to Determine what GDP for this economy is using the expenditure approach

Using this formula

GDP by expenditure method=C+I+G+X-M

Let plug in the formula

GDP by expenditure method= 6,300+2,300+4,521+3,120-200

GDP by expenditure method=$16,041 billions

Therefore GDP for this economy is $16,041 billion

B. Calculation to determine the statistical discrepancy.

First step is to calculate GDP at MP by income method

GDP at MP by income method=8,174+365+903+1,895+1,343+1,987+1,341

GDP at MP by income method=$16,008 billions

Now let calculate the Statistical discrepancy using this formula

Statistical discrepancy= GDP by expenditure method - GDP by income method

Let plug in the formula

Statistical discrepancy=$16,008-$16,041

Statistical discrepancy=$33 billions

Therefore the statistical discrepancy between national income and net national product, obtained when GDP is measured using the expenditure approach is $33 billion.