Answer:
a. <u>GDP using product approach</u>
There are no intermediate goods inputs. Corn producer grows 30 million bushels of corn and each bushel of corn worth is $5.
GDP = 30 million * $5
GDP = $150 million
<u>GDP using expenditure approach</u>
i) Consumers buy 20 million bushels of corn
Consumption = 20 million * 5
Consumption (C) = $100 million
ii) Corn producer adds 5 million bushels to inventory
Investment = 5 million * $5
Investment (I) = $25 million
iii) Government buys 5 million bushels of corn
Government spending = 5 million * $5
Government spending (G) = $25 million
GDP = C + I + G
GDP = $100 + $25 + $25
GDP = $150 million
<u>GDP using income approach</u>
Profit income = $150 million - $60 million - $20 million
Profit income = $70 million
Government income = Taxes paid by the corn producer = $20 million
GDP = $60 million + $70 million + $20 million
GDP = $150 million
b. Private disposable income = GDP + Net factor payments + Government transfers + Interest on the government debt - Total taxes
Private disposable income = $150 million + 0 + $5 million + $10 million - $30 million
Private disposable income = $135 million
Private savings = Private disposable income - Consumption
Private savings = $135 million - $100 million
Private savings = $35 million
Government savings = Government tax income - Transfer payments - Interest on the government debt - Government spending
Government savings = $30 million - $5 million - $10 million - $5 million
Government savings = $10 million
National savings = Private savings + Government savings
National savings = $35 million + $10 million
National savings = $45 million
Government budget surplus = Government savings = $10 million
Government deficit = (-) $10 million
