Measuring Gdp
Chapter 21: Measuring GDP and Economic Growth
Problem: 1 a. Aggregate expenditure:
Aggregate expenditure is the sum of consumption expenditure, investment, government expenditure, and net exports i.e. AE = C + I + G + (X – M)
In the figure, B is consumption expenditure, D is investment, C is government expenditure, and E is net exports.
Therefore Aggregate Expenditure = $7,064 billion + $1,624 billion + $1,840 billion + (−$330 billion) which is $10,198 billion.
b. Aggregate income:
Aggregate income equals aggregate expenditure, which from 1(a) is $10,198 billion.
c. GDP (Y):
Gross Domestic Product is measured either by adding all expenditures or all incomes received by all the factors of production.
Therefore Y = $10,198 billion.
d. Government budget deficit:
The government budget deficit equals government expenditures minus net taxes i.e. (G – T).
C is government expenditure, and A is net taxes. So the government budget deficit equals $1,840 billion minus $2,200 billion, which is −$360 billion, that is, the government had a government budget surplus of $360 billion.
e. Household saving:
Household saving S = (Y – C – T)
From 1(b), income (Y) is $10,198 billion. In the figure, B is consumption expenditure (C) and A is net taxes (T).
Therefore household saving S = ($10,198 billion - $7,064 billion - $2,200 billion) which is $934 billion.
f. Government saving:
Government saving = (T – G).
In the figure, A is net taxes and C is government expenditure. Therefore government saving = ($2,200 billion - $1,840 billion) which is $360 billion.
g. National saving:
National saving = (Household saving + Government saving). Household saving is $934 billion (see answer 1e). Government saving is $360 billion (see answer 1f).
Therefore National Saving = ($934 billion + $360 billion) which is $1,294 billion.
Problem: 3 * Martha’s initial capital stock is 10 copiers. * Depreciation is 1 copier per year.
Problem: 1 a. Aggregate expenditure:
Aggregate expenditure is the sum of consumption expenditure, investment, government expenditure, and net exports i.e. AE = C + I + G + (X – M)
In the figure, B is consumption expenditure, D is investment, C is government expenditure, and E is net exports.
Therefore Aggregate Expenditure = $7,064 billion + $1,624 billion + $1,840 billion + (−$330 billion) which is $10,198 billion.
b. Aggregate income:
Aggregate income equals aggregate expenditure, which from 1(a) is $10,198 billion.
c. GDP (Y):
Gross Domestic Product is measured either by adding all expenditures or all incomes received by all the factors of production.
Therefore Y = $10,198 billion.
d. Government budget deficit:
The government budget deficit equals government expenditures minus net taxes i.e. (G – T).
C is government expenditure, and A is net taxes. So the government budget deficit equals $1,840 billion minus $2,200 billion, which is −$360 billion, that is, the government had a government budget surplus of $360 billion.
e. Household saving:
Household saving S = (Y – C – T)
From 1(b), income (Y) is $10,198 billion. In the figure, B is consumption expenditure (C) and A is net taxes (T).
Therefore household saving S = ($10,198 billion - $7,064 billion - $2,200 billion) which is $934 billion.
f. Government saving:
Government saving = (T – G).
In the figure, A is net taxes and C is government expenditure. Therefore government saving = ($2,200 billion - $1,840 billion) which is $360 billion.
g. National saving:
National saving = (Household saving + Government saving). Household saving is $934 billion (see answer 1e). Government saving is $360 billion (see answer 1f).
Therefore National Saving = ($934 billion + $360 billion) which is $1,294 billion.
Problem: 3 * Martha’s initial capital stock is 10 copiers. * Depreciation is 1 copier per year.