Consider an economy that produces wood, boats, and has a marketing agency. This year domestic wood production generates revenues of $80. Of this $80 worth of wood, $40 were purchased by the boat producer and $40 were sold abroad to a foreign company. The wood producer paid $40 worth of wages and $10 worth of taxes.

The boat producer combines the services of the marketing agency, the wood it purchased from the wood producer, and $20 worth of labor (wages) to produce $120 worth of boats. Its revenues, which include a boat produced in the previous year and that was carried as inventory, are $130. Domestic families buy all these boats. This company pays $10 worth of taxes.

The marketing agency, whose sole client is the boat company, generates a revenue of $40 which is enough to cover its labor costs of $40. This company pays no taxes.

The government in this economy uses the $20 worth of taxes and builds a port. The cost of the port is $40 that are paid to workers. This port is partially financed by an international loan of $20.

1. b)Calculate GDP using the three alternative approaches. Show your derivations.
2. c)Calculate the government budget/deficit. Show your derivations.
3. d)It turns out that the international loan never arrives and the government is forced to increase
4. taxes by an additional $20 for the wood producer. Recalculate GDP in this alternative scenario.
5. e)Imagine that the owner of the marketing agency succeeds to lower the wage of the workers
6. it employs to $20 and now it makes $20 worth of profits. Assume taxes for this company remain at 0. How does GDP change? Explain your answer.