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Week 03, Day 4 - Exercise 1 Solutions

Week 03, Day 4 - Exercise 1 Solutions - =($12 $0($48 $6[$81...

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EXERCISE #1 SOLUTIONS 1. Firm 1 Firm 2 Firm 3 Total Value of Sales $12 million $48 million $81 million Intermediate Goods $0 $6 million $24 million + $4 million Wages $6 million $20 million $30 million $56 million Interest Payments $3 million $10 million $4 million $17 million Rent $2 million $7 million $12 million $21 million Profit $1 million $5 million $7 million $13 million Total Expenditure by Firm $12 million $48 million $81 million Value Added per Firm $12 million $42 million $53 million $107 million Value added Approach: GDP = value of production of final goods and services = value of sales – intermediate goods for all firms
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Unformatted text preview: = ($12 - $0) + ($48 - $6) + [$81 – ($24 + $4)] = $107 million Expenditure Approach: GDP = spending on domestically produced final products = consumer spending (C) + investment spending (I) + government purchases (G) + exports (X) – imports (IM) = $81 + $0 + $0 + ($6 + $24) - $4 = $107 million Factor Incomes Approach: GDP = wages + interest payments + rent + profit = ($6 + $20 + $30) + ($3 + $10 + $4) + ($2 + $7 + $12) + ($1 + $5 + $7) = $107 million...
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