Consider a hypothetical island with a consumer, a coconut farm, a coconut restaurant, and a government. The coconut farm produces 10 coconuts, which are sold at 2 dollars each. Of the 10 coconuts, 4 were sold to the consumer, and 6 to the restaurant. The restaurant bought 6 coconuts from the farm and 3 from the neighboring island. The restaurant made 9 coconut dinners from the coconuts, and sold them at 5 dollars each. 7 were sold domestically, and 2 were sold to the neighboring island. The consumer supplied labor to the farm, restaurant and the government, earning 5, 4 and 7.5 dollars, respectively. The consumer owns the farm and the restaurant and thus is entitled to their profits. The government collected 1.5, 3.0 and 1.5 dollar of tax, respectively, from the farm (corporate income tax), restaurant (corporate income tax) and the consumer (labor income tax). The government paid the consumer 2.5 dollars in bond interest. The government finances its budget deficit by issuing bonds to the consumer. (a) Construct an income statement for the consumer, farm, restaurant, and the government. (b) Calculate the GDP of the island using three different approaches (expenditure, income and production).

Consider a hypothetical island with a consumer, a coconut farm, a coconut restaurant, and a government. The coconut farm produces 10 coconuts, which are sold at 2 dollars each. Of the 10 coconuts, 4 were sold to the consumer, and 6 to the restaurant. The restaurant bought 6 coconuts from the farm and 3 from the neighboring island. The restaurant made 9 coconut dinners from the coconuts, and sold them at 5 dollars each. 7 were sold domestically, and 2 were sold to the neighboring island. The consumer supplied labor to the farm, restaurant and the government, earning 5, 4 and 7.5 dollars, respectively. The consumer owns the farm and the restaurant and thus is entitled to their profits. The government collected 1.5, 3.0 and 1.5 dollar of tax, respectively, from the farm (corporate income tax), restaurant (corporate income tax) and the consumer (labor income tax). The government paid the consumer 2.5 dollars in bond interest. The government finances its budget deficit by issuing bonds to the consumer. (a) Construct an income statement for the consumer, farm, restaurant, and the government. (b) Calculate the GDP of the island using three different approaches (expenditure, income and production).

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Production And Growth

Section: Chapter Questions

Problem 3PA

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