suggested_solution_hmk1 - Econ 73-200 Fall 2008 Prof...

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Econ 73-200 Fall 2008 Prof. Daniele Coen-Pirani Suggested Solution to Problem Set #1 Exercise #1 [25 pts.]. You have been elected the national accountant of a small country (Costa Tepper) in Central America. You have the following list of transactions for the year 2006. The local co/ee shops sold $10000 worth of co/ee to local consumers. To produce the co/ee they purchased $2000 worth of beans from the local co/ee growers. The co/ee growers sold $2000 of co/ee beans to the local co/ee shops and $5000 to Starbucks (a foreign company). The local textile company bought $1000 worth of wool from an Australian company and produced $10000 worth of clothes. Of these clothes 60% were sold to domestic consumers 20% to the government of Costa Tepper and 20% to foreigners. The local textile companies also bought 10 trucks to do their deliveries, each worth $1000, from FIAT (a foreign company). The local bananas producers produced $50000 worth of bananas. $30000 were sold to domestic consumers, and $10000 were sold to Chiquita (a foreign company) and $10000 were sold to a local subsidiary of Dole (a foreign company). The subsidiary produced $20000 worth of canned bananas that were sold to domestic consumers. Dole paid $5000 in wages and repatriated the remaining income. The government raised $2000 from Costa Tepper residents in taxes, paid $1000 in pensions to retired Costa Tepper residents and purchased 1 Dell (a foreign company) computer (worth $1000) to keep track of its records. Finally, 3 Costa Tepper residents got consulting jobs in the US that gave each of them an income of $500. Calculate the following objects for 2006 in Costa Tepper: ° GDP ° GNP ° Private consumption expenditures ° Investment expenditures ° Government spending ° Net exports We know that GDP equals the sum of expenditures on °nal goods and services: GDP = C + I + G + NX: ° Let±s start by computing consumption C : ° Consumers buy $10,000 worth of co/ee.
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