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

9. Reconciliation between GNP and NI:

10. In a closed economy: GDP – depreciation = NDP NDP – indirect business taxes = NI Net Domestic Product 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?