In a carefully written paper complete the following List the

In a carefully written paper, complete the following:

List the four components of Gross Domestic Product(GDP) and provide an example of each.

Explain how each item affects you and the way that you live today

Adhere to the following standards:

Your paper should be two pages in length, not including the title or references pages.

Solution

Four compot nents of Gross Domestic Product are as follows

NNPfc = 1 + 2 + 3 + 4

Compensation of employees:

It includes:

It does not include:

Traveling Allowance, Employees’ contribution to Social Security benefits.

Operating Surplus:

It is income from property (Rent, Royalty, and Interest) and entrepreneurship (Profit = Dividend + Corporation tax + Undistributed profits/Retained Earnings).

Interest income does not include

Mixed Income of self employed:

It is mixed in the sense that it is not possible to classify it into rent, wages, profit or interest. It is generated by own-account workers and unincorporated enterprises. It arises in the case of enterprises like sole proprietorship, small partnership, farmers, barbers etc.

Net Factor Income from India

NFIFA is the difference between the income received from abroad by the residents of a country for rendering factor services and factor income paid to the residents of other countries. NFIA belongs to the private sector. Public sector does not earn any income in the form of NFIA. Any income earned by government employees from abroad is paid by the government itself. For example, Indian employee working in Indian embassy in US will get salary from the Indian government.

NFIA = Factor income received from abroad by normal residents – Factor income paid abroad to non-residents

IMPLICATION: Production activity within the economic /domestic territory is called domestic income. Income that the residents of a country are getting from outside the economic territory is called factor income from abroad; similarly income which residents of other country get from our economic territory is called factor income paid abroad. The difference between the two is called, Net Factor Income from Abroad. When NFIA is added to domestic income, we get national income.