Originally Posted by

**TimM** Hi rylemdr

I think I can help with this.

Firstly, regarding National Income, the question is asking you to compute GDP in a certain way. If you think about what GDP is--the total value of all final goods and services sold in a given period--two possible methods for computing GDP immediately spring to mind. 1, the amount of money the demand side of the economy spends on those goods and services. And 2, the amount of money the supply side receives for selling them. By definition the two are the same: aggregate expenditure must be equal to aggregate income (i.e. "national income"), since it is the same monetary flow.

So the question is asking you to compute GDP by adding up the amount of money earnt by all individuals in the economy during that period. Necessarily this is the same amount spent by all individuals (ignoring the foreign sector for simplicity). To find aggregate/national income, then, just sum all the income entries in your table. Check that you have this right by comparing it with the sum of all the expenditure entries. The two sums should be equal by definition.

Regarding the component terms of aggregate expenditure / aggregate income,

PCE is the amount the household sector spends on goods and services in a given period.

CE is the amount the household sector earns from supplying labour to firms.

X is self-explanatory.

GDKF is the amount of new capital formed not taking into account depreciation (net capital formation is gross capital formation adjusted for depreciatioin).

EDIP is the amount households earn from supplying capital to firms and housing services to other households (i.e. rent).

GCE is the amount the govt spends on goods and services.

M is self-explanatory.

GIPE is the same as EDIP but for the govt.

C is the profits firms earn in a given period.

So aggregate expenditure would be PCE + GDKF + GCE + (X - M). This corresponds exactly to C + I + G + NX. And aggregate income would be CE + EDIP + GIPE + C. And by definition PCE + GDKF + GCE + (X - M) = CE + EDIP + GIPE + C.