National Income Determination Essay

Question 01 Answer Parts (a) through (g) using the information in Figure 01 describing the Sri Lankan economy. Quantities are given in millions of Rupees. (a) Calculate gross private investment. (b) Calculate GDP. (c) Calculate gross national product (GNP). (d) Calculate net national product (NNP). (e) Calculate national income. (f) Calculate personal income. (g) Calculate disposable personal income. Figure 01 Gross private domestic investment 586.

1 Compensation of employees 5,178. 6 Sri Lankan exports of goods and services 380. Personal taxes 600. 0 Inventory investment -30. 9 corporate taxes 215. 9 Depreciation 643. 5 Personal consumption expenditures 3,514. 8 Government purchases of goods and services 1,589. 7 Indirect business taxes minus subsidies 489. 6 Net factor payments to the rest of the world -17. 3 Residential construction 453. 7 Corporate profits minus dividends 45. 7 Government transfer payments and interest 337. 1 Sri Lankan imports of goods and services 285. 0 Social insurance payments 441. 7

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Question 02 Figure 02 contains the national income and product accounts data on the Sri Lankan economy. Quantities following are given in millions of Sri Lankan Rupees. Use thisinformation to answer Parts (a) through (g) below. (a) Calculate Sri Lankan gross private investment. (b) Calculate Sri Lankan GDP. (c) Calculate Sri Lankan GNP. (d) Calculate net national product (NNP). (e) Calculate national income. (f) Calculate personal income.

(g) Calculate disposable personal income. Figure 02 Depreciation 168. 0 Corporate profits 257. Exports 212. 8 Imports 235. 2 Net interest income 182. 2 Personal consumption expenditures 2,203. 2 Compensation of employees 1,407. 7 Dividends 78. 4 Government purchases 716. 8 Indirect taxes 593. 6 Net private domestic investment 784. 0 Personal interest income 112. 0 Receipts of factor income from the rest of the world 35. 2 Personal taxes 627. 2 Proprietor’s income 173. 9 Payments of factor income to the rest of the world 68. 8 Rental income 34. 1 Subsidies 44. 8 Social insurance payments 380. 8 Transfer payments 504. 0

Question 03 Answer Parts (a) and (b) below using the information contained in Table 2. 3. Assume thiseconomy only produces corn and steel. (a) Refer to Table 2. 3. Calculate nominal GDP for year 1 and year 2. (b) Refer to Table 2. 3. Calculate real GDP for year 1 and year 2 (using fixed weights andyear 1 as base). Year Y1 Y2 Quantity 2000 2200 Corn Price 1. 00 1. 50 Quantity 100 80 Steel Price 6. 00 7. 00 (c) If nominal GDP is Rs. 8 trillion and real GDP is Rs. 5 trillion, calculate the value of the GDPdeflator. Question 04 One day Barry the Barber, Inc. collects $400 for haircuts.

Over this day, his equipment depreciates in value by$50. Of the remaining $350, Barry sends $30 to thegovernment in sales taxes, takes home $220 in wages,and retains $100 in his business to add new equipmentin the future. From the $220 that Barry takes home, hepays $70 in income taxes. Based on this information,compute Barry’s contribution to the following measuresof income: a. Gross domestic product b. net national product c. national income d. personal income e. disposable personal income

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