Effect of National Income on a Nigerian Citizen Standard of Living

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NAME: OLUBOYE OLUMIDE OLUWAFEMI

DEPARTMENT: ECONOMICS

LEVEL: 100L

MATRIC NO: E029173

COURSE: ECO 102

Lecturer in Charge: Dr. A. Aminu

CONTINOUS ASSESMENT 1

SECTION A:

Question: 1. If the GDP>GNP; it follows that the net factor income from abroad is negative.

ANSWER: TRUE

Question 2: GDP measures how much a country is producing usually only in a year.

ANSWER: TRUE

QUESTION 3: Output produced by Nigerian citizens working abroad for a foreign company is not counted in Nigeria’s GDP.

ANSWER: TRUE

QUESTION 4: Suppose a 25 year old house is sold to Mr. Gbasibe for $5 million and Mr. Gbasibe pays the real estate agent in charge of the sales a commission of one per cent. The contribution of this economic activity to GDP is only $5,050,000.

ANSWER: FALSE

QUESTION 5: Nominal GDP is the same thing as GDP at constant prices

ANSWER: FALSE

QUESTION 6: Income earned through illegal activities makes national income to be less.

ANSWER: TRUE

QUESTION 7: A man who marries his secretary reduces his country’s GNP.

ANSWER: AMBIGUOUS

QUESTION 8: Macro stock variables include total bank deposits and investment .

ANSWER: TRUE

QUESTION 9: Constant gyrations or swings in currency exchange rate is one of the goals of macroeconomics

ANSWER: FALSE

QUESTION 10: The GNP price index is equally refers to as GNP implicit price deflator

ANSWER: TRUE

SECTION B:

1. Given the following national income data for a hypothetical state of 35 million people. Compute (a) GDP (b) GNP (c) NNP (d) National income and (e) Per capita real GNP.

ITEM $MILLION

Income from employment 162.4

Transfer payments 11.0

Gross capital formation 63.2

Subsidies 12.4

Indirect business taxes 14.5

Export of commodity 15.0

Government final consumption expenditure 58.7

Net factor income from abroad -1.3

Private consumption expenditure 186.1

Personal taxes 38.5

Import of commodity 17.2

Consumption of fixed capital 10.5

SOLUTION:

(1a) Y=C +I +G+(X-M)

The equation above illustrates the definition of GDP of a country using the Income Approach.

Y=GDP,

C=Consumption,

I=Investment,

G=Government spending/Expenditure

(X-M) is the net export. It is either derived to be +ve or –ve.

Our C, from the indices given above is the private consumption expenditure and is given as $ 186.1 million.

I is the investment (Gross capital formation) represented as $63.2 million.

G Our Government Spending /Expenditure is given as $58.7 million.

X-Value of the exported commodity is given as $15.0 million.

M-Imported commodity valued to be $17.2 million.

So we can now slot in the values of each variance into the equation to determine the GDP of the hypothesis.

Y= C+I +G +(x-M)

=186.1 +63.2 +58.7(15-17.2)

=308+ (-2.2)

=308-2.2

GDP = $305.8 million.

(b) GNP is the addition of all the factors of production (GDP) with the net factor income abroad.

GNP=GDP + Nfi

GNP = 305.8+ (-1.3)

=305.8-1.3

GNP =$304.5 million.

(c) NNP is derived by deduction of any depreciation “consumption of fixed capital” from GNP.

NNP= GNP-Depreciation (Cfc/Deposit/CCA)

NNP=304.5 -10.5

NNP=$294 million

(d) National Income N.I =NNP- Net Indirect business taxes

N.B; This Net Indirect business taxes includes subsidies etc

National Income (N.I) = NNP-NET Indirect business taxes (IBT)

N.I= NNP – (IBT-Subsidies(S))

N.I= $294million –...
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