Unit 3: National Income Accounting

Question 1

Gross Domestic Product (GDP) Calculation

Answer 1

C + Ig + G + XN [X - M] = GDP

Consumer Expenditure + Gross Investment + Government Spending + Net Exports = GDP

Question 2

National Income (NI) Calculation

Answer 2

NDP - NFFIEUS - Indirect Business Taxes = NI

Net Domestic Product - Net Foreign Factor Increase Earned in the US - Indirect Business Taxes = NI

Question 3

Personal Income (PI) Calculation

Answer 3

NI - Undistributed Corporate Profits - Corporate Income Taxes - Social Security = PI

Question 4

Disposable Income (DI) Calculation

Answer 4

PI - Personal Income Taxes = Disposable Income (DI)

Question 5

Gross National Product (GNP)

Answer 5

OWNERSHIP!!!!!!!!!!! (citizenship matters, not geography)

All goods/services produced legally for pay by citizens of a country a year.

Question 6

Gross Domestic Product (GDP)

Answer 6

LOCATION!!!!!!!!!!!!! (geography matters, not citizenship)

All goods/services produced legally for pay within a country’s borders for a year.

Question 7

GDP Expenditures Approach

Answer 7

GDP = C (66%) + Ig (18%) + G (17%) + XN

Question 8

Personal Consumption Expenditure (C)

Answer 8

(1) Durable consumer goods (12%) – affected most during recession
(2) Nondurable goods (29%)
(3) Consume expenditure for service (59%)