420Worksheet1bans

420Worksheet1bans - Expenditure Method: Investment (Assume...

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Worksheet 1 - addendum 1. ABC Computer Company has a $20,000,000 factory in Silicon Valley. During the current year ABC builds $2,000,000 worth of computer components. ABC’s costs are labor: $1,000,000 interest on debt: $100,000 Taxes: $200,000 ABC sells all its output to XYZ Supercomputer. Using ABC’s components, XYZ builds four supercomputers at a cost of $800,000 each ($500,000 worth of components, $200,000 in labor costs, and $100,000 in taxes per computer). XYZ has a $30,000,000 factory. XYS sells three of the supercomputers for $1,000,000 each. At year’s end, it had not sold the fourth. The unsold computer is carried on XYZ’s books as an $800,000 increase in inventory. a. Calculate the contributions to GDP of these transactions using the expenditure approach, output approach and income approach, showing all three approaches give the same answer. b. Repeat part (a), but now assume that, in addition to its other costs, ABC paid $500,000 for imported computer chips.
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Unformatted text preview: Expenditure Method: Investment (Assume that the supercomputer is purchased by firms): $3,000,000 Change in Inventory: $800,000 ________ GDP $3,800,000 Product Method: (Add value added of production) ABC company: Value added $2,000,000 XYZ company: Value added $1,800,000 ________ $3,800,000 Income Method: ABC + XYZ Wages: 1,000,000 + 800,000 = $1,800,000 Interest 100,000 + $100,000 Taxes 200,000 + 400,000 = $600,000 Profit 700,000 + 600,000 = $1,300,000 _________ $3,800,000 Expenditure Method: Investment (Assume that the supercomputer is purchased by firms): $3,000,000 Imports:- $500,000 Change in Inventory: $800,000 ___________ GDP $3,300,000 Product Method: (Add value added of production) ABC company: Value added $1,500,000 XYZ company: Value added $1,800,000 ________ $3,300,000 Income Method: ABC + XYZ Wages: 1,000,000 + 800,000 = $1,800,000 Interest 100,000 + $100,000 Taxes 200,000 + 400,000 = $600,000 Profit 200,000 + 600,000 = $800,000 _________ $3,300,000...
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This document was uploaded on 10/28/2011 for the course ECON 420 at UNC.

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420Worksheet1bans - Expenditure Method: Investment (Assume...

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