If households pay $1,000 in interest payments and receive $1,200 in interest, wages equal $9,000, rental receipts on land are $200, total business profits before taxes are $2,200, depreciation is $1,750, and indirect business taxes are $1,000, then gross domestic income is
A) $15,350.
B) $14,350.
C) $13,150.
D) $11,400.

Question

Quizplus · Accepted Answer

Gross Domestic Income (GDI) is calculated by adding up all incomes earned by households and businesses in the economy. In this case, GDI is calculated as follows: interest received ($1,200) + wages ($9,000) + rental receipts ($200) + business profits before taxes ($2,200) - depreciation (not included in GDI) + indirect business taxes ($1,000). The interest payments made by households ($1,000) are not subtracted because the interest received already represents the net interest income for the economy. Therefore, GDI = $1,200 + $9,000 + $200 + $2,200 + $1,000 = $13,600. However, the correct calculation should include all components correctly, leading to the realization that the provided calculation in the explanation has an error in not subtracting depreciation correctly and misinterpreting the components that should be included in the GDI calculation. The correct approach to calculate GDI should sum up all forms of income (wages, interest received, rental receipts, business profits before taxes, and indirect business taxes) and adjust for any necessary components correctly. Given the error in the initial explanation, the correct calculation should actually consider the correct components leading to the realization that none of the provided answer choices directly match the correct sum based on the standard GDI formula. The correct calculation should directly sum the components that contribute to GDI without incorrectly excluding or including items not typically adjusted in GDI calculations.

If Households Pay $1,000 in Interest Payments and Receive $1,200