Consider an economy with a corn producer, some consumers, and a government. In a given year,...

Consider an economy with a corn producer, some consumers, and a government. In a given year, the corn producer grows 30 million bushels of corn and the market price for corn is $5 per bushel. Of the 30 million bushels produced, 20 million are sold to consumers, 5 million are stored in inventory, and 5 million are sold to the government to feed the army. The corn producer pays $60 million in wages to consumers and $20 million in taxes to the government. Consumers pay $10 million in taxes to the government, receive $10 million in interest on the government debt, and receive $5 million in Social Security payments from the government. The profits of the corn producer are distributed to consumers.
(a) Calculate GDP using (i) the product approach, (ii) the expenditure approach, and (iii) the income approach.

On the Chegg solutions the Income approach is calculated like this: GDP=(60+70+20) million = 150.
My question is why isn't tax paid by consumers added here and why isn't 10 million $ of interest counted in income? Please help.

Expert Solution

Rahul Sunny answered 2 years ago

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