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Consider an extension of that model that includes a water company that sells water to both the corn farm and the fertilizer, and the
Consider an extension of that model that includes a water company that sells water to both the corn farm and the fertilizer, and the corn farm will also sell some of their corn to a new company, the bread company, which turns corn into bread. Using the above relations and the numbers below, draw a circular flow diagram for this economy, and assume that there is one representative household that owns and works at all four firms. Then calculate the GDP of this economy using each of the three methods. Fertilizer Company Revenue Expenses (Wages) Expenses (Water) Profit Corn Farm Revenue 500 Expenses (Wages) 200 Expenses (Fertilizer) 200 Expenses (Water) 50 Profit 50 Value-Added Water Fertilizer Corn Bread 200 100 50 50 GDP Final Goods Income Value-Add Water Company Revenue Expenses (Wages) Profit Bread Company Revenue Expenses (Wages) Expenses (Corn) Profit Household Total Income Total Spending 100 50 50 200 50 100 50
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