Question 1Consider an economy with two firms and a government. Firm 1 produces 10000 units of good X, whichit sells for $20 per unit. It uses this revenue to pay $140000 in wages, $10000 in taxes, and $10000 ininterest on a loan, with the rest as profits. Firm 1 sells some of its output to consumers, and some toFirm 2 as an intermediate good in their production process.Firm 2 uses good X as an input into its manufacturing process. It buys 8000 units of good X and usesthem to create 1000 units of good Y, which it sells for $400 per unit. It pays $200000 in wages and$20000 in taxes, with the rest as profits.The government takes in taxes from only these two firms, and uses it to pay wages to providegovernment services, for instance national defense.Please calculate GDP using the three different methods. (Of course, you'll arrive at the same answer;however, indicate clearly what values you're using in each case to arrive at the final answer, so as toillustrate you know what is included in each method of calculating GDP.)1)Income approach:2)Expenditure approach:3)Product (value-added) approach:

ood X as an input into its manufacturing process. It buys 8000 units of good X 1000 units of good Y, which it sells for $400 per unit. It pays $200000 in wag es, with the rest as profits. =nt takes in taxes from only these two firms, and uses it to pay wages to provid. ervices, for instance national defense. te GDP using the three different methods. (Of course, you'll arrive at the same cate clearly what values you're using in each case to arrive at the final answer, know what is included in each method of calculating GDP.) coach: approach: ue-added) approach:

ood X as an input into its manufacturing process. It buys 8000 units of good X 1000 units of good Y, which it sells for $400 per unit. It pays $200000 in wag es, with the rest as profits. =nt takes in taxes from only these two firms, and uses it to pay wages to provid. ervices, for instance national defense. te GDP using the three different methods. (Of course, you'll arrive at the same cate clearly what values you're using in each case to arrive at the final answer, know what is included in each method of calculating GDP.) coach: approach: ue-added) approach:

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter11: Fiscal Policy And The Federal Budget

Section: Chapter Questions

Problem 5WNG

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1.2. In the table below is data for a hypothetical private-closed economy. Table 1 A Private Closed Economy Real domestic output (GDP=DI) (billions) Consumption (billions) Saving (billions) Investment (billions) Aggregate Expenditures (billions) $240 260 280 300 320 340 360 380 400 $244 260 276 292 308 324 340 356 372 $ -4 0 4 8 12 16 20 24 28 $16 16 16 16 16 16 16 16 16 $260 276 292 308 324 340 356 372 388 Recall, private means that there is no government and closed means that there is no foreign trade. Use the information in the Table 1 to analyze aggregate expenditures (AE) model below (Figure 1. Equilibrium in a Private Closed Economy). Figure 1. Equilibrium in a Private Closed Economy 1.3. Identify the mistake and explain why the graph of the aggregate expenditures line does not correctly illustrate the economy's equilibrium. (See attached picture)
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