Measuring Total Output and Income
Read this chapter, to learn about measuring domestic output, and attempt the "Try It" exercises. The material in this chapter concentrates on the four components of GDP: consumption, investment, government purchases, and net exports. Pay attention to the definition of these components as it may differ from your expectations. For example, note that Investment does not refer to the common knowledge definition of investment as in the trading of stock and bonds. Instead, the Investment component refers mainly to the purchase of physical machinery and equipment needed in the production of goods and services. You will revisit certain sections of the chapter later in this unit.
6.2 Measuring Total Income
TRY IT!
The following income data refer to the same economy for which you had output data in the first part of the previous Try It! Compute GDI from the data below and confirm that your result equals the GDP figure you computed in the previous Try It! Assume that GDP = GNP for this problem (that is, assume all factor incomes are earned and paid in the domestic economy).
| Employee compensation | $700 |
| Social Security payments to households | 40 |
| Welfare payments | 100 |
| Profits | 200 |
| Rental income | 50 |
| Net interest | 25 |
| Depreciation | 50 |
| Indirect taxes | 175 |