Exercises ( Chapter 2) ECO211

banking (ba119)

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 EXERCISES (CHAPTER 2)

QUESTION 1

The following data shows the national income for a country 2016.

COMPONENTS RM (Million)
Public consumption expenditure 2000
Private consumption expenditure 1500
Public gross investment 1000
Private gross investment 2500
Increase in stock 800
Export of goods and services 4500
Import of goods and services 3500
Indirect tax 700
Subsidy 1200
Factor income paid abroad 2800
Factor income received abroad 3200
Depreciation 200
Transfer payment 900
Employees provident fund 500
Corporate tax 300
Retained earnings 250
Social security contribution 400
Personal income tax 150

Calculate:

a) Gross Domestic Product at market price.

GDPmp = C + I + G + (X-M)
GDPmp = 2000 + 1500 + 1000 + 2500 + 800 + (4500-3500)
GDPmp = 8800 m

b) Gross Domestic Product at factor cost.

GDPfc = GDPmp - IT + S
GDPfc = 8800 - 700 + 1200
GDPfc = 9300 m

c) Gross National Product at factor cost

GNPfc = GDPfc + NIFA

GNPfc = 9300 + (3200 - 2800)
GNPfc = 9700 m

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d) National income.

NI = GNPfc - depreciation
NI = 9700 - 200
NI = 9500 m

e) Personal Income

PI = NI + transfer payment - corporate income taxes - retained earning - SOCHSO -

insurance premium
PI = 9500 + 900 - 500 - 300 - 250 - 400
PI = 8950 m

f) Disposable personal income.

DPI = PI - Income tax

DPI = 8950 -150
DPI = 8800 m

QUESTION 2

The table below contains an item from the national account of a country.

ITEMS RM MILLION
Government spending 800
Household consumption 700
Public investment 650
Private investment 550
Change in inventories 200
Export of goods 500
Import of goods 300
Net factor income from abroad -100
Tax on expenditure 250
Subsidies 350
Capital consumption 220
Business taxes 330
Insurance premium 440
Transfer payments 880
Employees provident funds 400
Undistributed profit 380
Private income taxes 280

Calculate:

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a) Gross Domestic Product at market price

GDPmp = C + I + G + (X - M)
GDPmp = 800 + 700 + 650 + 550 + 200 + (500 - 300)
GDPmp = 3100 m

b) Gross National Product at market price.

GNPmp = GDPmp + NIFA

GNPmp = 3100 - 100
GNPmp = 3000 m

c) Gross National Product at factor cost

GNPfc = GNPmp - IT + S
GNPfc = 3000 - 250 + 350
GNPfc = 3100 m

d) National Income.

NI = GNPfc - depreciation
NI = 3100 - 220
NI = 2880 m

e) Personal income.

PI = 2880 + 880 - 440 - 330 - 400 - 380

PI = 2210 m

f) Disposable income.

DPI = PI - personal income tax

DPI = 2210 - 280
DPI = 1930 m

QUESTION 3

The table below contains a random selection of items from the national account of a country.

ITEMS RM MILLION
Manufacturing 10000
Mining 8000

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 Construction 5000
Agriculture and fishing 20000
Transportation 6000
Banking and insurance services 25000
Water and gas 15000
Wholesales and retails 11000
Education services 7000
Government services 4000
Other services 9000
Factor income received from abroad 3500
Factor income paid abroad 5500
Subsidies 2500
Tax on expenditure 3000
Capital consumption 1500
Employees provident funds 1200
Social security contribution 1400
Transfer payments 4500
Undistributed earnings 2200
Tax on companies’ profit 1800
Private income taxes 700

Calculate:

a) Gross Domestic Product at market price.

GDPmp = Final goods and services

GDPmp = 10000 + 8000 + 5000 + 20000 + 6000 + 25000 + 15000 + 11000 + 7000 +
4000 + 9000
GDPmp = 120000 m.

b) Gross Domestic Product at factor cost.

GDPfc = GDPmp - IT + S
GDPfc = 120000 - 3000 + 2500
GDPfc = 119500 m

c) Gross National Product at factor cost.

GNPfc = GDPfc + NIFA

GNPfc = 119500 + (3500 - 5500)
GNPfc = 117500 m

d) Net National Product at factor cost.

NI = GNPfc - depreciation
= 117500 - 1500
= 116000 m

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e) Disposable Personal Income.

DPI = 116000 + 4500 - 1200 - 1400 - 2200 - 1800 - 700

= 113200 m

QUESTION 4

The following table shows the national income data of country AAA in 2017.

COMPONENTS RM (MILLION)
Manufacturing and construction 5550
Agriculture and forestry 7550
Mining and quarrying 4550
Electricity and water 6550
Transport, storage and communication 8550
Hotel and restaurant 3550
Business services 2650
Other services 5650
Net factor income from abroad 2550
Indirect taxes 1050
Subsidy 1250
Depreciation of capital 550
Undistributed profit 250
Corporate income taxes 150
Transfer payment 850
Employee provident fund 350
Social security contribution 450
Personal income taxes 750

Calculate:

a) Gross Domestic Product at factor cost.

GDPmp = 5550 + 7550 + 4550 + 6550 + 8550 + 3550 + 2650 + 5650

GDPmp = 44600 m

GDPfc = GDPmp - IT + S
GDPfc = 44600 - 1050 + 1250
= 44800 m

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b) Gross National Product at market price.

GNPmp = GDPmp +NIFA

GNPmp = 44600 + 2550
= 47150 m

C) Net National Product at market price.

NNPmp = GNPmp - depreciation

NNPmp = 47150 - 550
= 46600m

c) Net National Product at factor Cost.

GNPfc = GNPmp - IT + S
= 47150 - 1050 + 1250
= 47350 m

NNPfc = GNPfc - depreciation

= 47350 - 550
= 46800 m

d) Disposable Personal income.

DPI = PI - personal income tax

= 46800 + 850 - 250 - 150 - 350 - 450 - 750
= 45700 m

QUESTION 5

The table below contains a random selection of items from the national account of a country.

COMPONENTS RM MILLION
Wages and salaries 1220
Interest 1240
Distributed profit 2220
Undistributed profit 2240
Rent 3220
Net factor income from abroad -220
Transfer payments 720
Depreciation 420
Insurance premium 220
Employees provident fund 320
Personal income taxes 180

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Calculate:

a) Gross Domestic Product (GDP) at factor cost.

GDPfc = 1220 + 1240 + 2220 + 2240 + 3220

= 10140 m

b) Gross National Product (GNP) at factor cost.

GNPfc = GDPfc + NIFA

= 10140 + (-220)
= 9920 m

c) National income.

NI = GNPfc - depreciation
= 9920 - 420
= 9500 m

d) Personal income.

PI = 9500 + 720 - 220 - 320 - 2240

= 7440 m

e) Disposable Personal Income.

DPI = PI - income tax

= 7440 - 180
= 7260 m

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