1. From the Expenditure angle, what is the largest component of GDP?
Consumption

2. From the Expenditure angle, what is the smallest component of GDP?

3. Expenditure Approach to 1996 GDP ($ Billions)

4. From the Expenditure angle, what is the smallest component of GDP?
Net Exports

5. From the Income angle, what is the largest & smallest component of GDP?

6. 1996 National Income ($ Billions)

7. From the Income angle, what is the largest & smallest component of GDP?
Largest: Compensation of Employees.
Smallest: Rental Income.

8. Bringing GDP & National Income into accord:
+ Net Factor Payments from Abroad
= GNP
Receipt of Factor Incomes from the rest of the world – Payment of Factor Incomes to the rest of the world
GNP - Depreciation
= NNP
Net National Product
NNP - Indirect Business Taxes
= National Income

9. Reconciliation between GNP and NI:

10. – indirect business taxes
GDP – depreciation
= NDP
Net Domestic Product
In a closed economy:
NDP
– indirect business taxes
= NI
Sales taxes
Excise taxes
Customs duty
Property taxes
License Fees

11. National Income (NI) is what people earn.
Personal Income (PI) is what people receive.
PI = NI
+ income received but not earned
– income earned but not received
Disposable Personal Income
= PI – Direct Taxes

12. How Comprehensive is GDP?
Value of Housework
The Underground Economy
Leisure
Quality of Goods and Services
Costs of Environmental Damage

13. Use the following data to compute GDP, GNP, NNP, NI, PI and Personal Disposable Income.

14. Suppose next year, the following changes in economic activity occur in the country. What effect would these changes have on GDP?