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EC140 Lecture Notes - Lecture 4: Disposable And Discretionary Income, Gdp Deflator, Black Market

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School
WLU
Department
Economics
Course
EC140
Professor
David Johnson

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EC140 Full Course Notes
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Document Summary

Ec140 lecture #4: the measurement of national income (continued) Gdp and gnp: a measure of national output closely related to gdp is gross national product (gnp) the difference between gdp and gnp is the difference between income produced and income received. Gdp is superior as a measure of domestic economic activity. Gnp is superior as a measure of living standards of residents a more refined measure is disposable personal income o disposable personal income=gnp any part not actually paid households personalincometaxes+transfer paymentsreceived by households. Gdp deflator=nominal gdp realgdp o: the comparison of real and nominal gdp implicitly defines a price index, changes in which reveal changes in the (average) prices of goods produced domestically. Omissions from the gdp national income accountants cannot measure economic activity that takes place outside of regular, legal markets: illegal activities, leisure, the underground economy, home production, economic bads the current approach is useful because: 1. it would be difficult to correct the major omissions.

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Related Questions

Table 1.7.5. Relation of Gross Domestic Product, Gross National Product, Net National Product, National Income, and Personal Income
Line 2015 2016
III IV I II
1 Gross domestic product (GDP) 18141.9 18222.8 18281.6 18436.5
4 Gross national product 18332.5 18434.1 18454.2 18632.5
14 Net national product 15488.4 15571.4 15580.6 15732.4
16 National income 15724.4 15836.2 15844.9 15956.6
25 Personal income 15556.1 15690.2 15740.1 15900

Part 2: Income Approach to Calculating GDP

What is the difference between GDP and GNP? What is the difference in what the GDP measures compared to GNP?

Based on the table, what calculations must you make to determine GNP from GDP?

What is national income (NI)? What does NI measure?

Which was higher in this year, GNP or NI? By how much?

What calculations must you make to determine NI from GNP?

NI is composed of a number of categories. What category makes up the largest portion of NI?

Part 2: Income Approach to Calculating GDP (weight 25% of the assignment grade) Complete the following exercise: Go to http://www.bea.gov/ Find the information on GDP in billions of current dollars for the past four quarters. In U.S. Economic Accounts under National click on Gross Domestic Product (GDP), then click on Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables – click “Begin using the data”- choose Section 1: Domestic Product and Income and find table 1.7.5 1. Create the table that contains the following information for the last year quarterly. Omit the intermediate lines found in Table 1.7.5 on the web site. Gross domestic product Gross national product Net national product National income Personal income 2. Write a report in your own words (1 page, double-spaced), which contains the analysis of the results you received. In this report consider, but do not be limited to the following: What is the difference between gross domestic product (GDP) and gross national product (GNP)? What is the difference in what GDP measures compared to GNP? Based on the table, what calculations must you make to determine GNP from GDP? What is national income (NI)? What does NI measure? Which was higher in this year, GNP or NI? By how much? What calculations must you make to determine NI from GNP? NI is composed of a number of categories. What category makes up the largest portion of NI?

The Gross National Product (GNP) of the United States is equal to

A. the value of the total income received by all of the residents of the United States.

B. the value of final goods and services produced within the United States.

C. the value of the total income received by all households in the United States, after taxes are paid.

D. the value of final goods and services produced by U.S. factors of production.

 

If a large amount of production within a country takes place at foreign-owned facilities, then it is likely that the country's GDP will be (larger than/smaller than) GNP.