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Free Example of The Economics Issue Essay

In calculating gross national product by expenditure approach an individual computes the expenditures incurred in and outside the economy among its nationals. The expenditure approach computation of the GNP is equal to adding consumption, gross private investment, government expenditures and the net export.

Therefore, GNP =3120+295+195+855+620=5190

In computing the gross national expenditure an individual considers the following components: domestic absorption, a government final expenditure on consumption and the total capital formed.

From the question 7, therefore, gross national product = 620+295+855+3120+195=5085.

This has incorporated components from the question such as the government expenditure, consumption of fixed capital, gross private, domestic investment, house hold consumption expenditure and the government investment expenditures.

In calculating a country’s GNP the user of the national income accounting information seeks to establish a country’s economic growth. This is taking into account the production outside the nation’s border. That is why in this accounting model that is GNP= GDP + net factor earnings from abroad. Since, this is the expenditure approach and we are interested in the final value of end products of the commodities, we will calculate the net exports which are X-M (exports minus imports). The formula becomes on expansion;

GNP= C+I+G+(X-M)

C =consumption on fixed capital (295) + household consumption expenditure (3120) = 3415

I= government investment expenditure (195 part of GDP) + gross private investment 855 (net private investment + capital consumption allowance) =1050

G= 620

X-M= 680-575=105, Therefore, GNP= 3415+ 1050+620+105=5190

The country’s gross national expenditure has the following components: the private consumption, general government consumption and the gross domestic investment.

In the test, given the GNE= 295+620+855+3120+195=5088

A new machine which was bought during the year will be accounted for as an estimate of the expenditure using the GDP method. The reason is because the machine is an investment that is private to the owners business.

Under the computation of expenditures in finding the value of GDP, you can also include the purchase of 50 shares from BHP Billiton stock. The reason for that is because the amount spent in buying the shares is part of the domestic expenditures in carrying out the investment plan of buying the stock.

It is worth noting that other estimates are not included here as part of estimates to be taken into account when computing the GDP, for example, under the income approach. And the reason for thar is their value is more of income rather than expenditure estimates.

In question 11(ii)

The following are the estimates to be considered in the calculation for this year’s GDP. When making this decision it is important to consider the estimates as part of which to be included in the expenditure approach; it is informed by the fact in calculating national income accounts. Through the expenditure approach we use are the expenses on goods and services only. For example, the benefits highlighted in question 11 (d) are part of personal incomes, therefore, they are not included in the GDP by expenditure approach.

First, you include the estimate on the amount spent on buying the copy machine. This can be explained that the business person in this case is investing his money, therefore, it is an expenditure into the business account.

Second, the estimate to include is the expenditure incurred as a result of buying the BHP Billiton ownership rights in the form of shares. This is an investment, therefore, in national income accounting procedure an individual is ought to include the estimates.

Code: Sample20

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