Question
Question 2: An economy consists of only two firms, A and B. There is no government and no foreign sector. Firm A produces $3000 worth
Question 2: An economy consists of only two firms, A and B. There is no government and no foreign sector. Firm A produces $3000 worth of output, while firm B produces $4000 worth of output. Firm A sells $1500 worth of output to consumers, $900 worth of output to firm B for immediate use in production, and another $600 worth of output to firm B to be used as investment goods. Firm B sells $2000 worth of output to consumers, $700 worth of output to firm A for immediate use in production, and another $1200 worth of output to firm B to be used as investment goods. Firm B has $100 worth of output which it cannot sell, and which is added to its inventories. a) Use the value-added approach to find the GDP of this economy. b) Redo part (a) using the expenditure approach.
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