Econ 102

Exercise No.2 Measuring Domestic Output and National income

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Course: __________________________

Instructions:

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Item 1.

Suppose the government's national income and product accounts revealed the following
information:
Expenditure Approach Amount
Personal consumption expenditure 1 980 088
Government consumption expenditure 354 981
Gross domestic capital formation 541 233
Exports of goods and services 1 478 016
Imports of goods and services 1 577 727
Statistical discrepancy (109 483)
Net Factor Income from Abroad 126 960
Compensation of employees 725 261
Net operating surplus 1 468 612
Depreciation 235 845
Indirect business taxes less subsidies 237 390

a. Using the data in the table, verify that the income approach and expenditure approach,
yield the same measure of GDP. Set-up the National Income Accounting Procedure.
b. Compute the value of the National Income (NI).
c. Find PI, personal income, by making the appropriate adjustments to NI.
d. Calculate the GNP value.

Item 2 - Real GDP and price indexes

Suppose an economy produces only one good. In the
base year, production was 8 units at a price of $10 each.
The next year, production increased to 9 units and the
price of the good increased to $12.

a. Find nominal GDP in years 1 and 2.

b. If the price index is 100 in the base year, what is
the value of the price index in year 2?
c. Find real GDP in year 2.

Suppose a hypothetical national economy can be

represented by the following data:
Nominal Price Index Real
Year GDP (2000 = 100) GDP
2007 $1536 128
2008 $1663 132
2009 135 $1274
2010 $1792 140

d. Find real GDP in years 2007, 2008, and 2010.

e. Find nominal GDP in year 2009.