Answer:
(a) Product approach;
The value of Firm A’s production 50,000 *$3=$150,000.
The value of Firm B’s production 50,000 * $2= $100,000.
Firm B pays $60,000 to firm A for 20,000 bushels of wheat, which is an intermediate input. Firm B’s value added is therefore $40,000. GDP is therefore equal to $190,000.
(b) Expenditure approach:
Consumers buy 50,000*$2/loaf and 15,000*$1/loaf.
Consumption spending is therefore equal to $100,000 + $15,000 = $115,000.
Firm A adds 5,000 bushels* $3= $15,000.
Firm A exports 25,000 * $3= $75,000.
Consumers import 15,000 * $1=$15,000.
Net exports are equal to $75,000- $15,000 = $60,000. There is no government spending. GDP is equal to consumption ($115,000) plus 3 investment ($15,000) plus net exports ($60,000). G
DP =$190,000.
(c) Income approach:
Firm A pays $50,000 in wages+ Firm B pays $20,000 in wages= $70,000. Firm A produce $150,000 - $50,000 in wages=. $100,000 profits.
Firm B produces $100,000 -$20,000 in wages- $60,000 to Firm A for wheat=$20,000 profits
Total profit income in the economy equals $100,000+ $20, 000 = $120,000. Total wage income ($70,000) plus profit income ($120,000) equals $190,000. GDP is therefore $190,000.
Explanation:
