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11 February, 14:10

ne day, Barry the Barber, Inc., collects $400 for haircuts. Over this day, his equipment depreciates in value by $50. Of the remaining $350, Barry sends $30 to the government in sales 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 his information, compute Barry's contribution to the following measures of income: gross domestic product, net national product, national income, personal income, disposable personal income.

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  1. 11 February, 14:15
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    a) $400 b) $350 c) $350 d) $220 e) $150

    Explanation:

    The question is divided into 5 parts:

    Part a) Determine the Gross Domestic Product Contribution by Barry's company

    GDP represents a total of goods and services consumed within a nation's borders within a certain period of time. Barber, Inc contribution is the value of haircut service rendered to the citizens which is $400

    Part b) Net National Product This represents Barry's total income when the depreciation is subtracted from the income.

    Income is $400 and equipment depreciation is $50

    Net national Product = $400 - $50 = $350

    Part c) Barber Inc's contribution to national income: The national income represents the total income earned by the resident of a country and it is usually calculated as the same value as the Net National Product. The contribution to national income = $350

    Part d) Personal Income: this is seen as Barry the Barber, inc's income. The figure usually excludes indirect business taxes as well as retained earnings. The formula is = national Income - Retained earnings - Sales tax

    = $350 - 100-30 = $220

    Part e) Disposable Personal Income: This represents the income left to a business after it has paid government dues such as personal taxes.

    It is calculated as Personal Income - personal tax

    =220-70 = $150
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