GDP

Consider an economy with three firms:

• Firm 1 sells \$75 of steel to Firm 3. From its earnings, it pays \$25 in wages and keeps \$50 in profits.

Don't use plagiarized sources. Get Your Custom Essay on
GDP
Just from \$13/Page

• Firm 2 sells \$30 of rubber to Firm 3. Firm 2 pays \$10 in wages and keeps \$20 in profits.

• Firm 3 sells \$240 of cars to households. It pays for its inputs (from Firm 1 and Firm 2); keeps one third of its remaining earnings as profits,and pays two thirds in wages. Let’s calculate GDP various ways.

(a) What is the final value of goods and services?

Consider an economy with three firms:

• Firm 1 sells \$75 of steel to Firm 3. From its earnings, it pays \$25 in wages and keeps \$50 in profits.

• Firm 2 sells \$30 of rubber to Firm 3. Firm 2 pays \$10 in wages and keeps \$20 in profits.

• Firm 3 sells \$240 of cars to households. It pays for its inputs (from Firm 1 and Firm 2); keeps one third of its remaining earnings as profits,and pays two thirds in wages. Let’s calculate GDP various ways.

(b)  Calculate GDP as the sum of value added.