Question
Consider an economy which consists of three firms, A, B, and C, consumers, and a government. Firm A is a computer manufacturer, while Firm B
Consider an economy which consists of three firms, A, B, and C, consumers, and a government. Firm A is a computer manufacturer, while Firm B is a parts factory. Firm C is a computer retailer. In 2021, Firm B produces $180,000 worth of parts, of which $100,000 it sells to Firm A, and $50,000 to Firm C. In addition Firm B sells $15,000 worth of parts to the government, and $15,000 worth of parts it exports. Firm B pays workers $80,000. Firm A produces computers worth $800,000, out of which $450,000 it sells to the computer retailer (Firm C), $190,000 it sells to the government, and the rest of the computers it stores as inventory to be sold the following year. The computer factory (Firm A) uses imported materials from Japan worth $125,000. The computer factory pays workers $210,000 and $60,000 in taxes to the government. The computer retailer (Firm C) sells $740,000 worth of computers: $510,000 worth to domestic consumers, and the rest to foreign consumers in the United States. The computer retailer pays taxes $60,000 to the government and $90,000 to the workers for marketing and sales. Consumers receive $80,000 as dividends from abroad. The profits of firms A are distributed to domestic consumers. However, firms B and C are foreign owned. (a) ( 15 marks ) Calculate GDP using, the product approach, the expenditure approach, the income approach. Show your work clearly (Note: you will not get marks for simply providing the final number). (b) (9 marks ) Calculate GNP, the current account surplus, and government savings for this economy.
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