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    Calculating National Income

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    Calculating National Income

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    Copyright:

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    2 views9 pages

    Calculating National Income

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    of 9

    Calculating National Income

    Macroeconomics Practice – Dr. Garamvölgyi Judit


    The Components of GDP

    Y = C + I + G + NX
    • Consumption is spending by households on goods and services, with the exception of purchases of new
    housing
    • Investment is the purchase of goods (called capital goods) that will be used in the future to produce more
    goods and services. Investment is the sum of purchases of business capital, residential capital, and
    inventories.
    • Government purchases measure spending on goods and services by local, state, and federal governments.
    This component includes the salaries of government workers as well as expenditures on public works
    • Net exports equal the foreign purchases of domestically produced goods (exports) minus the domestic
    purchases of foreign goods (imports). Export - Import

    © 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain 2
    product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
    Calculate the GDP
    • Consumer spending = $200 million
    • Investment spending = $55 million
    • State and local government spending = $120 million
    • Federal government spending = $80 million
    • Imports = $50 million
    • Exports = $45 million
    • Income taxes = $100 million

    © 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain 3
    product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
    Real versus Nominal GDP
    • nominal GDP the production of goods and services valued at current prices
    • real GDP the production of goods and services valued at constant prices
    • GDP deflator a measure of the price level calculated as the ratio of nominal
    GDP to real GDP times 100

    © 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain 4
    product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
    Exercise 2
    Price of Quantity of Price of Quantity of
    Year
    Hot Dogs Hot Dogs Hamburgers Hamburgers

    2019 1 100 2 50

    2020 2 150 3 100

    2021 3 200 4 150

    Calculate the Nominal GDP for each year


    Calculate the Real GDP for each year (base year 2019)
    Calculate the GDP deflator for each year

    © 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain 5
    product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
    Results
    Calculating Nominal GDP
    • 2019 ($1 per hot dog X 100 hot dogs) + ($2 per hamburger X 50 hamburgers) = $200
    • 2020 ($2 per hot dog X 150 hot dogs) + ($3 per hamburger X 100 hamburgers) = $600
    • 2021 ($3 per hot dog X 200 hot dogs) + ($4 per hamburger X 150 hamburgers) = $1,200
    Calculating Real GDP (base year 2019)
    • 2019 ($1 per hot dog X 100 hot dogs) + ($2 per hamburger X 50 hamburgers) = $200
    • 2020 ($1 per hot dog X 150 hot dogs) + ($2 per hamburger X 100 hamburgers) = $350
    • 2021 ($1 per hot dog X 200 hot dogs) + ($2 per hamburger X 150 hamburgers) = $500
    Calculating the GDP Deflator
    • 2019 ($200/$200) X 100 = 100
    • 2020 ($600/$350) X 100 = 171
    • 2021 ($1,200/$500) X 100 = 240
    © 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain 6
    product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
    Other indicators

    GDP = C + I + G + (X – M) or GO – Consumption by producers


    NDP = GDP – amortisation
    GNI = GDP + income from abroad – income sent abroad
    NNI = GNI – amortisation

    © 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain 7
    product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
    Exercise 3
    Gross Output: = 3000 billion
    Consumption by producers: 2000 billion
    Amortisation: 400 billion
    Foreign labour and capital income of resident nationals: 450 billion
    Foreigners' labour and capital income earned in the country: 600 billion
    GDP =
    NDP =
    GNI =
    NNI =

    © 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain 8
    product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
    Results
    • GDP=3000-2000=1000
    • NDP=1000-400=600
    • GNI=1000+450-600=850
    • NNI=850-400=450

    © 2018 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain 9
    product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

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