# 1 hwy by the bc government expenditure on china made

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Unformatted text preview: ent Expenditure on China-made computers at Future shop by Canadian households Expenditure on expanding a size of factory by Honda Canada Inc. in Alliston, Ontario 2 / 3 x x x SFU Econ 105 Week 5 Summer 2013 5. The list below provides some national figures for the Econ 105 economy in a given year. Figures Wage and salary Interest income Personal consumption Personal saving Business profit Indirect taxes Subsidies \$ 4000 200 2730 1000 330 150 50 Figures Government expenditures Export Import Net investment Depreciation Transfer payment Wage received from the U.S. \$ 1700 1000 1300 1000 300 500 250 a. Using both expenditure and income approaches, calculate the value of GDP for this economy. ( show all relevant categories in each approach) Using the expenditure approach; Ca = 2730 Ia = 1000 + 300 = 1300 (Net investment + depreciation) Ga = 1700 – 500 = 1200 ( Gov’t purchases = gov’t expenditure – transfer payment) NXa = 1000 – 1300 = - 300 GDP = 2730 + 1300 + 1200 – 300 = \$4930 Using the income approach; Factor income = wage + interest income + business profit =4000 + 200 + 330 = 4530 Non factor payment = indirect tax - subsidy + depreciation = 150 - 50 + 300 = 400 GDP = \$4930 b. Explain using your own words why income side and expenditure side must be identical in national income accounting. GDP from income side is the sum of factor incomes, indirect taxes ( net of subsides) and depreciation, while GDP from expenditure side is the sum of actual consumption, actual investment, actual gov’t purchase and actual net exports The value of aggregate output produced in a given period represents total incomes given to economic agents in an economy. At the same time, expenditures on domestic output represent the value of output produced in a given time period. 3 / 3 SFU Econ 105 Week 5 Summer 2013 c. The “government purchases” component of GDP does not include spending on transfer payments such as Social Security. Thinking about the definition of GDP, explain why transfer payments are excluded. From the expenditure side, total value of output must be the same as total expenditures on domestic output made by HHs, firms, government and foreigners. However, the transfer payment is not an expenditure made on domestic output. it is just a transfer of income earned from one to another through the income tax system. 4 / 3...
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## This note was uploaded on 01/20/2014 for the course ECON 105 taught by Professor Hanafiahharvey during the Summer '08 term at Simon Fraser.

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