101-2011-PS2ans

101-2011-PS2ans - Economics 101 Intermediate Macroeconomic...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 101 Marek Kapiˇ cka Intermediate Macroeconomic Theory Spring 2011 Problem Set 2 Answers 1 Measuring GDP Consider the following economy. There are two firms and a government. First, there is a phone company that has a total revenue of $14000. The phone company pays $5000 in wages and spends $2000 on a car that is used for repair service. The phone company does not have any other costs. Second, there is a car factory which produces 15 cars. 12 cars are sold to consumers, one to the phone company and two cars are unsold at the end of the year. The price of each car is $2000. The car factory pays $4000 in wages and $1000 to the phone company for local and long distance service. Finally, there is the government. The government spends $1000 to pay one police officer in this economy and another $1000 are spent on government fellowships for bright college students. 1. GDP by Production: Phone company’s Value added: $14000 (car is investment, not an intermediate good). Car company’s value added: $30000 (value of cars produced, inventory counts as investment purchased by the company itself) - $1000 (phone services are intermediate good) = $29000.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

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