CHAPTER 11 Gross Domestic Product 251 from GDP Explain why N

CHAPTER 11 Gross Domestic Product 251 from GDP. Explain why NI might be a better measure of economic performance than GDP EXHIBIT 11-9 National Income Data Amount (billions of dollars) 305 479 716 565 120 924 547 337 2,648 19 Corporate profits Gross private domestic investment Personal taxes Personal saving 12. imports Net interest Compensation of employees Rental income Exports Indirect business taxers Contributions for social Security (FICA Transfer payments and other income Proprietors\' income 2,966 370 394 967 328 9. Using the data in Exhibit 11-9, compute national income (NI) by making the required subtraction

Solution

GDP = Personal consumption expenditures + Government spending + Gross Private domestic investment + Exports - Imports.

GDP = 2,966 + 924 + 716 + 427 - 547

GDP = $4,486 billion.

NI = GDP - Depreciation - Indirect business tax + net factor income from abroad

NI = $4,486 - 479 - 370 + 0

NI = $3,637.

NI might be better measure of economic performance than GDP because National income is the total value of goods and services produced by the normal residents of a country during the period of one year, while Gdp measures the value of total value of output produce in the domestic territory of a country during a period of one year.

It means the national income include the income earned by the resident of the country in the foreign while it is not included in GDP. Also depreciation and indirect business taxes are not included in national income (NI) while it is included in GDP.