Answer to Question #155609 in Macroeconomics for safika

Question

One day, barry the barber,inc., collects $400 for haircuts. Over this day, his equipment depreciates in value by $50. Of the remaining $350, barty sends $30 to the government to the taxes, takes home $220 in wages, and retains $100 in his business to add new equipment in the future. From the $220 that barry takes home, he pays $70 in income taxes. Based on this information, compute barry's contributiin to the following measures if income.

a. Gross domestic ptoduct

b. Net national product

c. National income

d. Personal income

e. Disposable personal income

Answer 1

a. The money collected from the haircut is the gross domestic product.

Gross domestic product GDP = $400

b. Net national product is the difference between the contribution towards the GDP and depreciation.

NNP = contribution to GDP – Depriciation

= $400 - $50

= $350

Net national product = $350

c. The national income includes the total income earned by the residents of the country. The contribution to national income is same as the NNP.

National income = $350

d. Personal income is the difference between national income and retained earnings.

Personal income = National income – Retained earnings

= $350 - $100 - $30

= $220

Personal income = $220

e. Disposable personal income is the difference between the personal income and personal tax.

Disposable personal income = Personal income – Personal tax

= $220 - $70

= $150

Disposable personal income $150