The table below shows the national income of a country in 1998.

Use the data to answer the questions that follow:

ITEMS $ MILLIONS

Personal consumption expenditure 640.00

Gross Private Domestic Investment 180.00
Government expenditure 220.00
Exports of goods and services 175.00
Imports of goods and services 202.00
Subsidies 48.00
Indirect business taxes 322.00
Consumption of fixed capital 115.00
Net property income from abroad 80.00

1. Define Gross Domestic Product (GDP)

1. Calculate the:

2. Gross Domestic Product (GDP)

3. Gross National Product (GNP)

4. Net National Product (NNP)

1. (i) Determine the National Income at factor cost from the

Net National Product (NNP).

(ii) Give two reasons for your answer.

Most of the candidates were not attracted to this question. The question required that candidates carry out
simple calculations involving some estimates in national income accounting. A good number of the candidates
who attempted this question fell short of expectation. This fact affected their scores negatively. Candidates
were expected to answer thus:

(a) Gross domestic product (GDP) is the total market value of all final goods
and services produced annually in the country.

(b) (i) GDP = C + I + G + X - M

GDP = 640 + 180 + 220 + 175 202
= $1,013.00 million

(ii) GNP = GDP + Net property income from abroad

= 1,013.00 + 80.00
= $1,093.00

(iii) NNP = GNP Consumption of fixed capital

= 1,093.00 115.00
= $978.00

(c) (i) National Income at factor cost =

= NNP at market price Indirect taxes + subsidies
= 978 322 + 48
= $704.
 Billion of dollars ($)
Net investment 110
Depreciation 30
Export 50
Import 30
Government purchases 150
Consumption 400
Production taxes (net of subsidies) 35
Income earned but not received 60
Income received but not earned 70
Personal income taxes 50
Employee compensation 455
Corporate profit 60
Rental income 20
Net interest 30
Proprietors income 40
Net earnings of U.S resources abroad 40
Statistical discrepancy 10
a) Calculate GDP using income and expenditure approach

GDP income approach = 700

GDP expenditure approach = 710

b) Gross Investment

Gross = Net + dep =140

c) Calculate GNP, NNP, NI, PI and PDI

GNP = GDP + NET EARNING = 750

NNP = GNP DEP = 720

NI = NNP PRODUCTION TAXES = 685

PI = NI + INCOME RECEIVED INCOME EARNED = 695

PDI = PI PERSONAL INCOME TAX = 645