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.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Question 15 The economy has a coal producer, a steel producer, and some consumers (no government...

Question 15 The economy has a coal producer, a steel producer, and some consumers (no government sector). The coal producer produces 15 tons of coal which sells for $5 a ton pays $50 in wages The steel producer uses 25 tons of coal bought at $5 per ton, 15 tons come from the domestic coal producer and 10 from a foreign producer. Pays $40 in wages. Produces 10 tons of steel which sells for $20 per ton. 8 tons are...

Consider a corn farm, a bakery, some consumers and a government. The corn farm grows 4...

Consider a corn farm, a bakery, some consumers and a government. The corn farm grows 4 million tons of corn and the market price of corn is $50/ton. 1.5 million tons of corn are sold to consumers and the government buys 1 million tons to feed the army. The bakery buys 0.5 million tons of corn and sells it as cornbread to the consumers, earning a revenue of $50 million. The remaining 1 million tons are stored as inventory. The...

Consider an economy which consists of three firms, A, B, and C, consumers, and a government.

Consider an economy which consists of three firms, A, B, and C, consumers, and a government. Firm A is a smart phone factory, while Firm B is a parts factory. Firm C is a smart phone retailer. In 2020, Firm B produces $250,000 worth of parts, of which $150,000 it sells to Firm A, and $40,000 to Firm C. In addition Firm B sells $30,000 worth of parts to the government, and $30,000 worth of parts it exports. Firm B...

Consider an economy where consumers spend C, businesses invest I, and there is no government for...

Consider an economy where consumers spend C, businesses invest I, and there is no government for simplicity (TR = T = 0). In this economy we can write Consumption as: ? = ? + MPC∗GDP The economy also imports some amount of goods, but it does not export anything. We can represent imports (M) by the following: ? = ? + MPCF ∗ ?DP where MPCF can be thought of as the marginal propensity to consume foreign goods and F...

Consider a pure-exchange economy, with two consumers and two commodities. Initial endowments are given by w1...

Consider a pure-exchange economy, with two consumers and two commodities. Initial endowments are given by w1 = (4, 2) and w2 = (2, 3). Individual utility functions are u1(x11, x21) = x11 · x21 and u2(x12, x22) = x12 + x22. Find the competitive equilibrium.

Consider an economy. Government has measured inflation in this economy in the recent year using two...

Consider an economy. Government has measured inflation in this economy in the recent year using two methods: CPI method and the DGP-deflator method. The results showed that CPI inflation was higher than GDP-deflator measured inflation. How can you explain this? Support with theory and examples.

Consider the following 2 good, 2 consumers, one producer world. Moe, the producer, makes Soda (S)...

Consider the following 2 good, 2 consumers, one producer world. Moe, the producer, makes Soda (S) and Moon Pies (P). Homer (H) is one consumer. Barney (B) is the other. (Moe ate at home so he is not a consumer for this one.) There are no externalities involved in the consumption of either good. Everyone, including Moe, acts competively. Homer and Barney have placed their orders, but there is still time to change them. Money can be used for nothing...

Consider a small open economy. Suppose the domestic supply and demand for corn is

[Market Interventions and Government Policy]Consider a small open economy. Suppose the domestic supply and demand for corn isQs =10P and Qd =200−10P. SupposetheworldpriceisPw =$6.(a) Calculate the import quantity of corn, domestic consumer surplus andproducer surplus.(b) Now suppose a $2 tariff is imposed on imported corn. Calculate the new equilibrium price and quantity, domestic CS, domestic PS, government tax revenue, and DWL.(c) Show the CS, PS, government tax revenue, and DWL on a graph.(d) Ignore part (b), suppose the government impose...

Assume an economy with a car manufacturer, a car seller, and some consumers (there is no...

Assume an economy with a car manufacturer, a car seller, and some consumers (there is no government). The consumers are workers who earn a wage to finance their consumption. In a given year, the car manufacturer produces 200, 000 cars and sells them for $10, 000 per car. The workers’ wages take up 70 percent of the car manufacturer’s revenue. All the materials used for producing cars are imported from other countries at a cost of $1, 000 per car....

Describe the long-run outcome for a competitive corn producer and the competitive corn industry. Now suppose...

Describe the long-run outcome for a competitive corn producer and the competitive corn industry. Now suppose that the demand for corn increases. a. Discuss the adjustments by the firm and the industry. Explain. b. What happens to the firm’s long-run economic profit? Explain.

Subjects