Introduction to Finance

4. 
Assume personal income was $28 million last year. Personal outlays 
were $20 million and personal current taxes were $5 million.
a. 
What was the amount of disposable personal income last year?
b. 
What was the amount of personal saving last year?
c. 
Calculate personal saving as a percentage of disposable personal 
income. 
5. 
The components of a nation’s gross domestic product were identi-
fi ed and discussed in this chapter. Assume the following accounts and 
amounts were reported by a nation last year. Government expendi-
tures (purchases of goods and services) were $5.5 billion, personal 
consumption expenditures were $40.5 billion, gross private domestic 
investment amounted to $20 billion, capital consumption allowances 
were $4 billion, personal savings were estimated at $2 billion, imports 
of goods and services amounted to $6.5 billion, and the exports of 
goods and services were $5 billion.
a. 
Determine the nation’s gross domestic product.
b. 
How would your answer change if the dollar amounts of imports 
and exports were reversed?
6. 
Assume that some of the data provided in Problem 5 change next 
year. Specifi cally, government expenditures increase by 10 percent, 
gross private domestic investment declines by 10 percent, and imports 
of goods and services drop to $6 billion. Assume the other information 
as given remains the same.
a. 
Determine the nation’s gross domestic product for next year.
b. 
How would your answer change in (a) if personal consumption 
expenditures are only $35 billion next year and capital consump-
tion allowances actually increase by 10 percent?
7. 
A nation’s gross domestic product is $600 million. Its personal con-
sumption expenditures are $350 million, and government expendit-
ures are $100 million. Net exports of goods and services amount to 
$50 million.