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Assume an economy with two firms. Firm A produces wheat and firm B produces bread. In a given year, firm A produces 3500 tonnes of wheat, sells 1000 tonnes of wheat to firm B at $50 per tonne, exports 2000 tonnes of wheat at $50 per tonne, and stores 500 tonnes as inventory. Firm A pays $50,000 in wages to consumers. Firm B produces 80,000 loaves of bread and sells all of it to domestic consumers at $4 per loaf. Firm B pays consumers $10,000 in wages. In addition to the 80,000 loaves of bread consumers buy from firm B, consumers import and consume 30,000 loaves of bread, and they pay $1 per loaf for this imported bread. Calculate gross domestic product using (a) the product approach, (b) the expenditure approach, and (c) the income approach. a. Using the product approach, the value added by firm A is $ 175000 , the value added by firm B is $ 270,000', and GDP in this economy is $ 445,000'. b. Using the expenditure approach, C = $ 350,000', 1 = $ 25,000', G = $ 0 , NX = $ 70,000', and GDP in this economy is $ 445000 . c. Using the income approach, profits for firm A are $, profits for firm B are $ total wages are $ , and GDP in this economy is $

Assume an economy with two firms. Firm A produces wheat and firm B produces bread. In a given year, firm A produces 3500 tonnes of wheat, sells 1000 tonnes of wheat to firm B at $50 per tonne, exports 2000 tonnes of wheat at $50 per tonne, and stores 500 tonnes as inventory. Firm A pays $50,000 in wages to consumers. Firm B produces 80,000 loaves of bread and sells all of it to domestic consumers at $4 per loaf. Firm B pays consumers $10,000 in wages. In addition to the 80,000 loaves of bread consumers buy from firm B, consumers import and consume 30,000 loaves of bread, and they pay $1 per loaf for this imported bread. Calculate gross domestic product using (a) the product approach, (b) the expenditure approach, and (c) the income approach. a. Using the product approach, the value added by firm A is $ 175000 , the value added by firm B is $ 270,000', and GDP in this economy is $ 445,000'. b. Using the expenditure approach, C = $ 350,000', 1 = $ 25,000', G = $ 0 , NX = $ 70,000', and GDP in this economy is $ 445000 . c. Using the income approach, profits for firm A are $, profits for firm B are $ total wages are $ , and GDP in this economy is $

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Taking The Nation's Economic Pulse
Section: Chapter Questions
Problem 1CQ
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Assume an economy with two firms. Firm A produces wheat and firm B produces bread. In a given year, firm A produces 3500 tonnes of wheat, sells 1000 tonnes of wheat to firm B at $50 per tonne, exports 2000 tonnes of wheat at $50 per tonne, and stores 500 tonnes as inventory. Firm A pays $50,000 in wages to consumers. Firm B produces 80,000 loaves of bread and sells all of it to domestic consumers at $4 per loaf. Firm B pays consumers $10,000 in wages. In addition to the 80,000 loaves of bread consumers buy from firm B, consumers import and consume 30,000 loaves of bread, and they pay $1 per loaf for this imported bread. Calculate gross domestic product using (a) the product approach, (b) the expenditure approach, and (c) the income approach. a. Using the product approach, the value added by firm A is $ 175000 , the value added by firm B is $ 270,000', and GDP in this economy is $ 445,000'. b. Using the expenditure approach, C = $ 350,000`, I = $ 25,000', G = $ 0 , NX = $ 70,000', and GDP in this economy is $ 445000 . %3D c. Using the income approach, profits for firm A are $, profits for firm B are $ total wages are $ , and GDP in this economy is $
Transcribed Image Text:Assume an economy with two firms. Firm A produces wheat and firm B produces bread. In a given year, firm A produces 3500 tonnes of wheat, sells 1000 tonnes of wheat to firm B at $50 per tonne, exports 2000 tonnes of wheat at $50 per tonne, and stores 500 tonnes as inventory. Firm A pays $50,000 in wages to consumers. Firm B produces 80,000 loaves of bread and sells all of it to domestic consumers at $4 per loaf. Firm B pays consumers $10,000 in wages. In addition to the 80,000 loaves of bread consumers buy from firm B, consumers import and consume 30,000 loaves of bread, and they pay $1 per loaf for this imported bread. Calculate gross domestic product using (a) the product approach, (b) the expenditure approach, and (c) the income approach. a. Using the product approach, the value added by firm A is $ 175000 , the value added by firm B is $ 270,000', and GDP in this economy is $ 445,000'. b. Using the expenditure approach, C = $ 350,000`, I = $ 25,000', G = $ 0 , NX = $ 70,000', and GDP in this economy is $ 445000 . %3D c. Using the income approach, profits for firm A are $, profits for firm B are $ total wages are $ , and GDP in this economy is $
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