Question
A logging company (owned and operated in the U.S.) harvested 10 million MBF of timber in 2020.The same year, the logging company sold 1 million
A logging company (owned and operated in the U.S.) harvested 10 million MBF of timber in 2020.The same year, the logging company sold 1 million MBF to a pulp mill located in the U.S., 3 million MBF to a saw mill located in the U.S., and 5 million MBF to mills overseas.
All timber was sold at a market price of $300 per MBF. The remaining timber was not sold in 2020. Assume no intermediate goods or serviceswereused in harvesting timber.
Further suppose that the U.S. pulp mill used half of the timber that it purchased in 2020to produce paper. The rest was stored in a warehouse. The paper was sold in the same year to various end users at a total price of $200 million. Assume timber was the only intermediate good used in producing the paper.
Lastly, suppose the U.S. saw mill used all of the timber that it purchased in 2020to produce lumber. It then sold it to a building company at $400 per MBF. The building company purchased the lumber for use in various construction projects, none of which were completed in 2020. Assume timber was the only intermediate good used in producing lumber and thereisno loss of MBF when timberis converted to lumber.
Q1:Using the expenditure approach, calculate the total impact on 2020 U.S. GDP that resulted from these specific transactions. Explicitly show the effect on each expenditure category: C, I, G, NX
Q2: Show that you would arrive at the same final answer by using the value added approach.
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