Problem 2: An economy has the following sectors: private households, government, grape producers and wine producers. The government levies a sales tax (VAT) on both grape and wine of 20%. The grape producers pay their workers $500 and sell 600 kilos of grape to the wine producers and 200 kilos of grape to final consumers. The net price for one kilo of grape is $4. The wine producers pay their workers $700 and sell 500 bottles of wine to domestic consumers. Moreover, 100 bottles of wine are exported. The net price for one bottle of wine is $10. A) Describe in detail the three possibilities of calculating GDP. B) Calculate the GDP for the economy described above using each of these three possibilities.

Problem 2: An economy has the following sectors: private households, government, grape producers and wine producers. The government levies a sales tax (VAT) on both grape and wine of 20%. The grape producers pay their workers $500 and sell 600 kilos of grape to the wine producers and 200 kilos of grape to final consumers. The net price for one kilo of grape is $4. The wine producers pay their workers $700 and sell 500 bottles of wine to domestic consumers. Moreover, 100 bottles of wine are exported. The net price for one bottle of wine is $10. A) Describe in detail the three possibilities of calculating GDP. B) Calculate the GDP for the economy described above using each of these three possibilities.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter18: Public Economy

Section: Chapter Questions

Problem 27P: Say that the government is considering a ban on smoking in restaurants in Tobaccoville. There are 1...

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