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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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