Homework Help is Here – Start Your Trial Now!
Business
Economics
What is the change in GDP according to the *****income**** approach? How do the inputs that  make up Net Domestic Income (wages, interest, and profits) change?   I noticed that using the expenditure approach the GDP DECREASED by 800 dollars. My income approach is not working out.

What is the change in GDP according to the *****income**** approach? How do the inputs that  make up Net Domestic Income (wages, interest, and profits) change?   I noticed that using the expenditure approach the GDP DECREASED by 800 dollars. My income approach is not working out.

Brief Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Measuring A Nation's Income
Section: Chapter Questions
Problem 9PA
See similar textbooks
icon
Related questions
Question

What is the change in GDP according to the *****income**** approach? How do the inputs that 
make up Net Domestic Income (wages, interest, and profits) change?

 

I noticed that using the expenditure approach the GDP DECREASED by 800 dollars. My income approach is not working out. 

Suppose that the Government in this economy instead decided to import the same quantity of widgets from abroad and stopped buying widgets from Firm 2. In this case, the 10% of widgets that Firm 2 was going to sell to the Government is instead kept as inventories for next year.
Transcribed Image Text:Suppose that the Government in this economy instead decided to import the same quantity of widgets from abroad and stopped buying widgets from Firm 2. In this case, the 10% of widgets that Firm 2 was going to sell to the Government is instead kept as inventories for next year.
Firm 1 produces tires and sells $5,000 of its tires to Firm 2. Firm 1's costs include $3,000 to its workers, $500 as payments of interest on its outstanding debt, and $1,000 on rent for the property it uses. The owners keep the remaining revenues as profits. Firms 2 buys the tires and turns them into a final good called widgets. Firm 2 buys $5,000 of tires, creates these widgets, and produces $8,000 worth of widgets. 75% of these widgets are sold to domestic consumers, and 10% of the widgets are sold to the local Government. Firm 2 then keeps the last 15% of the widgets. It keeps these 15% of the widgets to be sold in the widget market next year. Firm 2 spends $5,000 on tires as an input to production, pays $400 to its staff, pays $500 in building rent, pays $300 to rent some machines it needs to use and does not own, and pays the rest of its revenues to the owner of the firm as profits.
Transcribed Image Text:Firm 1 produces tires and sells $5,000 of its tires to Firm 2. Firm 1's costs include $3,000 to its workers, $500 as payments of interest on its outstanding debt, and $1,000 on rent for the property it uses. The owners keep the remaining revenues as profits. Firms 2 buys the tires and turns them into a final good called widgets. Firm 2 buys $5,000 of tires, creates these widgets, and produces $8,000 worth of widgets. 75% of these widgets are sold to domestic consumers, and 10% of the widgets are sold to the local Government. Firm 2 then keeps the last 15% of the widgets. It keeps these 15% of the widgets to be sold in the widget market next year. Firm 2 spends $5,000 on tires as an input to production, pays $400 to its staff, pays $500 in building rent, pays $300 to rent some machines it needs to use and does not own, and pays the rest of its revenues to the owner of the firm as profits.
Expert Solution
steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Investments
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Brief Principles of Macroeconomics (MindTap Cours…
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
SEE MORE TEXTBOOKS