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QUESTION 3 (15 Marks) During a given year, suppose the following activities occur in an economy. i. An automobile manufacturing company pays its workers N$10 million to assemble 5,000 cars. The cars are then sold to an automobile store for N$12 million. ii. That year, the store pays N$1 million in wages to its salespeople, who sell the cars directly to consumers for N$15 million. a) Using the production-of-final-goods approach, what is GDP in this economy? (6) b) What is the value added at each stage of production? Using the value-added approach, what is GDP? (4) c) What are the costs incurred in terms of wage payment and the profits earned? Using the income approach, what is GDP? (5) QUESTION 4 (15 Marks) An economy produces three goods: cars, computers, and oranges. Quantities and prices per unit for years 2021 and 2022 are as follows: 2021 2022 Quantity Price Quantity Price Cars 10 N$2000 12 N$3000 Computers 4 N$1000 6 N$500 Oranges 1000 N$1 1000 N$1 a) What is nominal GDP in 2021 and in 2022? By what percentage does nominal GDP change from 2021 to 2022? (4) b) Using the prices for 2021 as the set of common prices, what is real GDP in 2021 and in 2022? By what percentage does real GDP change from 2021 to 2022? (4) c) Using the prices for 2022 as the set of common prices, what is real GDP in 2021 and in 2012. By what percentage does real GDP change from 2021 to 2022? (4) d) Why are the two output growth rates constructed in parts (b) and (c) different? Which one is correct? Explain your answer. (3) QUESTION 5 (10 Marks) Consider the economy described in Question 4 above. a) Use the prices for 2021 as the set of common prices to compute real GDP in 2021 and in 2022. Compute the GDP deflator for 2021 and for 2022 and compute the rate of inflation from 2021 to 2022. (4) b) Use the prices for 2022 as the set of common prices to compute real GDP in 2021 and in 2022. Compute the GDP deflator for 2021 and for 2022 and compute the rate of inflation from 2021 to 2022. (4) c) Why are the two rates of inflation different? Which one is correct? Explain your answer. (2)