Consider an economy with three domestic agents: Ann, Bill and Carl. And a foreign economy with a representative agent Fer
.
Solution:
Firm A produceS1000 pounds of wood (As intermediate goods sells 500 pounds sell to B, As final goods sell 200 pounds to others, 300 pounds sell to self as inventory) at $10 per pound.
Firm B produced 100 tables with the usage of 500 pounds of wood as inputs, and capital depreciated by $1,000). (Sold 70 tables to ABC as domestic consumption, Sold to F 30 tables as export) at $500 per table
The three approaches to calculate GDP are as follows:
1) Product approach (market value, newly produced, final goods and services)
GDP = (1,000 - 500) * $10 + (100 * $500) = $55,000
2) Expenditure approach:
GDP = C + I + G + NX;
C = (200*$10) + (70*$500) = $37,000
I = 300 * $10 = $3,000
G= $0
NX = 30*$500 - $0 = $15,000
Thus, GDP = $37,000 + $3,000 + $0 - $15,000 = $55,000
3) Income approach:
A's profit: 1,000 * $10 = $10,000
B's Net Profit: (100 * $500) - (500 * $10) - 1,000 = $44,000
Depreciated capital = $1,000
GDP = $10,000 + $45,000 + $1,000 = $55,000
Consider an economy with three domestic agents: Ann, Bill and Carl. And a foreign economy with...
Exercise 3. A simple economy. Consider an economy with three domestic agents: Ann, Bill and Carl. And a foreign economy with a representative agent Fer. Ann owns land and uses the trees in their yard for wood. She cuts down the trees and sells the wood. Bill owns a firm that buys wood and build and sell tables. Carl is a retired agent that has some wealth. There is no government. During the year the following transactions happen: o Ann...
Exercise 3. A simple economy. Consider an economy with three domestic agents: Ann, Bill, and Carl. And a foreign economy with a representative agent Fer. • Ann owns the land and uses the trees in their yard for wood. She cuts down the trees and sells the wood. Bill owns a firm that buys wood and builds and sell tables. Carl is a retired agent that has some wealth. There is no government. During the year the following transactions happen:...