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h1 - the expenditure approach Please use the following...

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Economics 502.01 Homework #1 1. Consider an economy with a coal producer, a steel producer and some consumers. There is no government. In a given year, the coal producer produces 15 million tons of coal and sells it for $5 per ton. The coal producer pays $50 million in wages to consumers. The steel producer uses 25 million tons of coal as an input into steel production, all purchased at $5 per ton. Of this, 15 million tons of coal comes from the domestic coal producer, and 10 million tons is imported. The steel producer produces 10 million tons of steel and sells it for $20 per ton. Domestic consumers buy 8 million tons of steel, and 2 million tons are exported. The steel producer pays consumers $40 million in wages. All profits made by domestic producers are distributed to domestic consumers. a. Complete a production statement for the two businesses, and determine GDP in this economy using product approach, the income approach and
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Unformatted text preview: the expenditure approach. Please use the following template to illustrate your answers. Gross Production Statement Costs Receipts Raw Materials Sales of Product Other Business Expenses Inventory Change Gross Value of Inputs Gross Value of Output GDP Production Statement Costs Receipts Sales of Product - Raw Materials Inventory Change Value Added from Inputs Value Added to Output b. Determine the current account surplus. HINT: Current Account (CA) equals Net Exports (NX) plus Net Factor Payments from Abroad (NFP). See top of page 40 in the text (6 th. ed.). c. What is GNP in this economy? Now consider an alternative case in which foreigners own the coal producer, so that the profits of the domestic coal go to foreigners and are not distributed to domestic consumers. Determine GNP and GDP in this case. 2. Textbook Chapter 2: Numerical Problem #6:...
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