PSa 10 - Statistics.pdf - DEPARTMENT OF ECONOMICS ECON1000 Principles of Economics Problem Set 10 Economic Statistics 1 An economy has only three

PSa 10 - Statistics.pdf - DEPARTMENT OF ECONOMICS ECON1000...

This preview shows page 1 - 2 out of 2 pages.

1. An economy has only three industries. The cotton industry uses no inputs and grows $2,300 worth of cotton that is bought by the fabric industry, which uses it to weave $4,100 worth of fabric, which in turn is used by the garment industry to sew $9,500 in jeans. Compute the GDP using both the value added and final goods methods. Since both the cotton and fabric industries only sell to other producers, garments is the only final good in this economy. So the final goods method, which counts the full value of only final goods, would lead to GDP of $9,500 since that is the value of garments produced. The value added method aggregates the value added in the production of each product. With no inputs the entire $2,300 of cotton production is value added. The fabric industry creates $4,100 of output from $2,300 worth of inputs, so their value added is difference, or $1,800. Similarly, the value added of the garment industry is the difference between the $9,500 of jeans manufactured and $4,100 worth of fabric used, which is $5,400. The sum of $2,300, $1,800, and $5,400 is $9,500.
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read both pages?

  • Fall '16

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask ( soon) You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors