Problem Set

1.(Measuring GDP) During a given year, the following activities occur:

i)A silver mining companypays its workers $200,000 to mine 75 kilograms of silver. The silver is then sold to a jewellery manufacturer for $300,000.

ii)The Jewellery manufacturerpays its workers $250,000 to make silver necklaces, which it sells directly to consumers for $1,000,000.

a) Using the"production final goods"approach, what is GDP in this economy?

(b)What is the value added at each stage of production? Using the"value-added"

approach, what is GDP?

(c)What are the total wages and profits earned? Using the "income approach", what is GDP?

(d)What conclusion can you draw from the three previous questions?

2.(Nominal and real GDP)An economy produces three goods: cars, computers, and oranges. Production units and prices per unit for years 1998 and 1999 are as follows:

\f