Consider the simple closed economy of Plantersville with only three goods: computers, peanuts and peanut butter....

Consider the simple closed economy of Plantersville with only three goods: computers, peanuts and peanut butter. There is no government, and no international trade. Note the following very important information:

Computers and peanut butter are final goods only.
Peanuts are consumed by households as a final good AND are used as an intermediate good by firms in the production of peanut butter.
It takes 1/2 pound of peanuts to make each jar of peanut butter.

The table below provides ALL the information you need to know on prices and total output/production in 2017.

	Year 2017	Year 2017
Items	Price per unit	Quantity Produced
Computers	$500	8
Pounds of Peanuts	$2.00	1200
Jars of Peanut Butter	$5.00	300

What is the current value of Plantersville's GDP? Just use numbers; no spaces, no commas, no decimal points.

Expert Solution

Answer : The current value of Plantersville's GDP is $7,600

The calculations and reasoning is provided in the following attached image file :

While calculating GDP of an economy, the value of only the final goods are added, while the value of intermediate goods are excluded from the GDP. Therefore, the amount of peanuts used for producing anything butter is excluded from the fina consumption of peanuts.

Rahul Sunny answered 2 years ago

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