The following transactions occurred in a given year. Firm A manufactures leather using a factory valued...
The following transactions occurred in a given year. Firm A manufactures leather using a factory valued at $20,000. Suppose Firm A produced $2,000 worth of leather and incurred the following costs: $1,000 for the salaries of workers, $100 for interest payments on a bank loan, and taxes of $200. Firm A sold all of its leather to Firm B, which is a manufacturer of luxury bags. Suppose Firm B produced four bags at a cost of $800 each. The cost of each bag consisted of paying for $500 worth of raw materials, paying for the salaries of workers for $200, and $100 in taxes. Firm B has a factory valued at $30,000. Firm B sold to the public three of its four bags for $1,000 each.
What is the contribution to GDP using the value added approach?
Answer choices: $1,800 $3,500 $3,800 $2,500 $2,000 $1,000
(i) What is the total income (that is, salaries, interest, taxes, and profit) ascribed to Firm A?
Answer choices: $2,000 $3,500 $3,800 $1,800 $1,000 $2,500
(ii) What is the total income (that is, salaries, interest, taxes, and profit) ascribed to Firm B?
Answer choices: $2,000 $3,500 $3,800 $1,800 $1,000 $2,500
(iii) What is the contribution to GDP using the income approach?
Answer choices: $2,000 $3,500 $3,800 $1,800 $1,000 $2,500
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