Suppose GDP is $300 million, depreciation is $10 million, net payments to the rest of the world are $30 million, and statistical discrepancy is $8 million. What is the value of national income?

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BlackTom AI · Accepted Answer

Let's restate the given data clearly and keep track of each component as we evaluate the options.
- GDP = 300 million
- depreciation = 10 million
- net payments to the rest of the world (outflows) = 30 million
- statistical discrepancy = 8 million

We will assess each answer choice by applying the typical national income accounting adjustments that appear in many introductory macroeconomics contexts.

Option 1: $252 million.
- One way to reach 252 is to compute NI as GDP minus depreciation and minus net payments to the rest of the world, then add the statistical discrepancy: 300 − 10 − 30 + 8 = 268, not 252. So 252 would require a 18 million difference somewhere, which is not justified by the given numbers. This option misapplies the role of the discrepancy or the treatment of the external payments.

Option 2: $268 million. 
- This matches the calculation: 300 − 10 − 30 + 8 = 268. Here we are effectively treating national income as GDP minus depreciation (to convert to net domestic income), then subtracting net payments to the ROW (interpreted as a deduction for external income flows), and then adding the statistical discrepancy to account for measurement balancing. This sequence aligns with an accounting identity that balances the difference between approaches to measuring income and output when a discrepancy is present. Therefore this option is consistent with the numbers provided.

Option 3: $312 million.
- This would result from a calculation such as 300 − 10 + 30 − 8 = 312, which misorders or mis-signs several components: it would imply adding the net payments to the ROW rather than deducting them, and subtracting the discrepancy instead of adding it. Since the problem statement provides a discrepancy and a net outflow to the ROW, simply adding the outflow and subtracting the discrepancy does not align with standard accounting identities here.

Option 4: We do not have enough information.
- The problem provides GDP, depreciation, net payments to the ROW, and statistical discrepancy. With those values, a specific NI can be computed using the given adjustments. Therefore, stating that there isn't enough information would be incorrect; the data given suffice for a calculation.

In summary, Option 2 ($268 million) is arrived at by applying GDP minus depreciation to obtain net domestic income, subtracting the net payments to the rest of the world to account for external income flows, and then adding the statistical discrepancy to balance the accounting. The other options either mis-handle one of the components or ignore the information provided. The reasoning shows why the alternative numbers do not align with the stated data and common national income accounting identities.

ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

Suppose GDP is $300 million, depreciation is $10 million, net payments to the rest of the world are $30 million, and statistical discrepancy is $8 million. What is the value of national income?

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ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

Suppose GDP is $300 million, depreciation is $10 million, net payments to the rest of the world are $30 million, and statistical discrepancy is $8 million. What is the value of national income?

View Explanation

Log in for full answers

Similar Questions

For an economy as a whole,[Fill in the blank]

Which of the following purchases do national income accountants consider to be investment?

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GNP equals GDP income earned domestically by foreigners income that nationals earn abroad.