Economics 3341 Exercise Set 1
Prof. G. Mongiovi Fall 2012
Due: Thursday, October 11
1. The following is a list of an economy’s National Income Account data for a particular year (in billions
of dollars).
Government Transfer Payments: $16 Rents: 10
Income Receipts from Rest of the World 27 Exports: 14
Income Payments to Rest of the World 33 Corporate Profits: 70
Government Purchases Of Goods & Services: 69 Interest Income: 12
Personal Income Taxes: 38 Dividends: 23
Corporate Income Taxes: 28 Imports: 17
Indirect Business Taxes: 15 Proprietors’ Income: 25
Social Security Taxes: 8 Statistical Discrepancy 0
Undistributed Corporate Profits: 19
Wages & Salaries: 248
Personal Consumption Expenditures: 267
Depreciation (Capital Consumption Allowance): 14
Net Private Domestic Investment: 47
Calculate GDP, GNP, NNP, National Income, Personal Income and Disposable Personal Income. You
should be able to compute GDP using both the expenditures approach and the income approach.
2. Using the following data, calculate GDP, GNP and NNP by both the expenditure approach and the
income approach (dollars in billions).
Indirect Business Taxes: $217.5 Net Exports: 23.3
Personal Consumption Expenditures: 1,672.8 Corporate Profits: 180.7
Gross Private Domestic Investment: 395.3 Interest Income: 179.8
Government Purchases of Goods & Services: 534.7 Proprietors’ Income: 130.6
Depreciation/Capital Consumption Allowance: 287.2 Rents: 33.8
Wages & Salaries: 1,596.5
Income Receipts from Rest of the World 247.1
Income Payments to Rest of the World 188.9
By the way, what is Net Investment for this economy?
3. Income Distribution exercise: The following table shows income distribution data for the US economy
in 1977 and 1999. Plot the Lorenz curves for the economy in 1977 and 1999. What do these curves
indicate about how income distribution has changed in the US over the past two decades? (The calculation
of the Gini Index is explained in D. Henwood (1993): “The Gini Index”
[http://www.leftbusinessobserver.com/Gini_supplement.html].
Share of Aggregate Income
Household
Group XXXXXXXXXX
One-fifth with lowest income 5.7% 4.2%
Next lowest one-fifth 11.5% 9.7%
Middle one-fifth 16.4% 13.4%
Next highest one-fifth 22.8% 22.6%
One-fifth with highest income 43.6% 50.1%
4. Price Index Problem: The following table gives information about weekly per capita food
consumption and food prices in Russia before and after the 1917 Communist Revolution. Taking 1913 as
the base year, calculate a Food Price Index for 1928 and 1940. Average weekly wages for the years
covered in the table were 6 rubles in 1913, 14 rubles in 1928 and 83 rubles in 1940. Using the Food Price
Indexes you have just calculated, assess what happened to the real wages of Russian workers between 1913
and 1940.
Food prices in Russia before and after the 1917 Revolution (in rubles per kilogram, except milk in liters
and eggs in units)
Foodstuffs consumed weekly Price Price Price
in Moscow in 1926 Quantity XXXXXXXXXX
Black Bread 2.46 kgs XXXXXXXXXX
Wheat flour 0.79 kgs XXXXXXXXXX
Potatoes 3.04 kgs XXXXXXXXXX
Beef 0.92 kgs XXXXXXXXXX
Mutton 0.17 kgs XXXXXXXXXX
Sugar 0.45 kgs XXXXXXXXXX
Milk 1.24 ltrs XXXXXXXXXX
Butter 0.11 kgs XXXXXXXXXX
Eggs 1.60 eggs XXXXXXXXXX
Sunflower oil 0.12 kgs XXXXXXXXXX
5. Find the proportions of consumption spending and investment spending in US GDP. What
proportion of US GDP is comprised of wages. The information can be found at the BEA website.