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2 marksNational Income Accounting

CAPE Economics Unit 2 · 2006 · Paper 2 · Question 1(e)(v)

Barry, the Barber Inc., collects 400 for haircuts on Fridays. Equipment depreciates by 50. Of the remaining 350, 30 is paid in sales tax, Barry takes home 220 in wages, and retains 100 in the business. From the 220 take-home pay, he pays 70 in income taxes.

Compute Barry's contribution to Disposable personal income.

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Other parts of this question

  1. 1(a)Using the definition of GDP, explain why transfer payments such as social security benefits are excluded when computing the 'government purchases' component of…[4 marks]
  2. 1(b)State the formula for converting nominal GDP to real GDP.[1 mark]
  3. 1(c)(i)a)Using 2001 as the base year, compute the Nominal GDP for each year (2001, 2002, and 2003).[5 marks]
  4. 1(c)(i)b)Using 2001 as the base year, compute the Real GDP for each year (2001, 2002, and 2003).[5 marks]
  5. 1(c)(i)c)Using 2001 as the base year, compute the GDP deflator for each year (2001, 2002, and 2003).[5 marks]
  6. 1(c)(ii)a)Compute the percentage change in Nominal GDP from 2001 to 2002 and from 2002 to 2003.[5 marks]
  7. 1(c)(ii)b)Compute the percentage change in Real GDP from 2001 to 2002 and from 2002 to 2003.[5 marks]
  8. 1(c)(ii)c)Compute the percentage change in the GDP deflator from 2001 to 2002 and from 2002 to 2003.[5 marks]
  9. 1(d)Explain why economists use real GDP rather than nominal GDP to measure economic well-being.[5 marks]
  10. 1(e)(i)Compute Barry's contribution to Gross domestic product.[2 marks]
  11. 1(e)(ii)Compute Barry's contribution to Net national product.[2 marks]
  12. 1(e)(iii)Compute Barry's contribution to National income.[2 marks]
  13. 1(e)(iv)Compute Barry's contribution to Personal income.[2 marks]

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