National Income Determination

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Unit 4 Assignment: National Income Determination

1. Your Assignment should have a cover sheet with the following information:

 Your Name  Course Number  Section Number

 Date 2. You may submit your Assignment using the Unit 4 Assignment template.

3. Your answers should follow APA formatting by being in double-spaced paragraph format, with

citations to your sources and, at the bottom of your last page, a list of references. Your answers

should also be in Standard English with correct spelling, punctuation, grammar, and style.

4. Respond to the questions in a thorough manner, providing specific examples of concepts, topics,

definitions, and other elements asked for in the questions. Your answers should be highly organized, logical, and focused.



This Assignment deals with how a nation’s income is measured using Gross Domestic Product

(GDP). In doing so, it highlights the various components of the GDP, the difference between nominal and real GDP, and the limitations of the GDP as a measure of national income.


1) U.S. real GDP is substantially higher today than it was 60 years ago. What does this tell us, and what does it not tell us, about the well-being of U.S. residents? What are the limitations of the GDP as

a measure of economic well-being? Given the limitations, why is GDP usually regarded as the best single measure of a society’s economic well-being?

2) What is an intermediate good? How does an intermediate good differ from a final good? Explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP, but the value of intermediate goods produced and not sold is included directly as part of GDP.

3) GDP is defined as the market value of all final goods and services produced within a country in a given period of time. In spite of this definition, some production is left out of GDP. Explain why some

final goods and services are not included.




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4) The table below contains data for country A for the year 2010.

Country A’s Goods and Services Total

Household purchases of durable goods $1293

Household purchases of nondurable goods $1717

Household purchases of services $301

Household purchases of new housing $704

Purchases of capital equipment $310

Inventory changes $374

Purchases of new structures $611

Depreciation $117

Salaries of government workers $1422

Government expenditures on public works $553

Transfer payments $777

Foreign purchases of domestically produced goods


Domestic purchases of foreign goods $120

Refer to the Table above to answer the following questions.

a. What was country A’s GDP in 2010?

b. What was country A’s consumption in 2010?

c. What was country A’s investment in 2010?

d. What were country A’s government purchases in 2010?

e. What were country A’s exports and imports in 2010? What was the net export in 2010?

Directions for Submitting Your Assignment


Before you submit your Assignment, you should save your work on your computer in a location and with a name that you will remember. Make sure your Assignment is in the appropriate template provided. Then, when you are ready, you may submit to the Dropbox.



Unit 4 [204]

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Unit 4 Assignment: National Income Determination Points Possible

Points Earned

Content and Analysis

Problem #1

Explained the changes in real GDP and its limitations.


Problem #2 Correctly explained intermediate goods in GDP.


Problem #3 Correctly identified the limitations of the GDP.


Problem #4 Compute GDP in 2010. (“a”)


Correctly calculate consumption. (“b”) 5

Correctly calculate investment. (“c”) 5

Computed government purchase. (“d”) 5

Identify export and import and calculate net export. (“e”) 5

Writing style, grammar, and APA formatting. 5

Total 50

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