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Consider a simple example economy where there are two goods, coconuts and restaurant meals (coconut-based). There are two firms.

tekilochka [14]

A) Product Approach

GDP = Value added of all industries

Value added = revenue - intermediate costs

Value added coconut producer = $20,000,000 (it does not have intermediate costs)

Value added restaurant = $30,000,000 - $12,000,000 (cost of coconuts)

= $18,000,000

Value added government = $5,500,000 (collected in taxes, $3 million from the restaurant, $1.5 million from the coconut producer, and $1 million from consumers).

GDP = $20,000,000 + $18,000,000 + $5,500,000

= $43,000,000

B) Expenditure Approach

GDP = Consumption + Investment + Government Spending + Net Exports

Consumption = $8,000,000 in coconuts + $30,000,000 in meals

= $38,000,000

Investment = $0

Government Spending = $5,500,000 in government wages

Net Exports = $0 (it is a closed-economy)

GDP = $38,000,000 + $0 + $5,500,000 + $0

= $43,500,000

C) Income Approach

Wages = $14,500,000

Corporate Profits = $24,000,000

Interest income = $500,000

Taxes = $4,500,000

GDP = $43,500,000

e. How does this new piece of information affect your calculations in the expenditure approach? Explain.

GDP under the expenditure approach, would rise by the value of the unsold coconuts ($1 million) as long as the coconuts were harvested in the given year. This is because inventory produced in the given year, is part of that year's GDP.

7 0

3 years ago

Select the incorrect statement regarding costs and expenses.

egoroff_w [7]

Answer: Option C

Explanation: In simple words, expenses refers to outflow of money from the pockets or account of any individual or an entity with the objective of acquiring or producing something.

Manufacturing cost refers to the amount of resources that were out flowed the organisation while producing a good or service. Since the resources are getting out flowed, these costs are always recorded as expense over the operational life of the entity.

Labor cost, electricity bill of machines and purchase cost of raw materials etc are some of many examples of manufacturing cost.

7 0

3 years ago

Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 25 years to maturity that is

Snezhnost [94]

Answer:

Pretax = 5.61%

After tax = 4.26%

Explanation:

The cost of debt will be the Yield to maturity of the bonds.

91 = present values of the 25 year annuity + present value of the maturity

There is no formula for exact YTM

we can either use excel or calculate by approximation:

In this case we will calcualte the YTM by aprroximation

$YTM = 2\times (\frac{C + \frac{F-P}{n }}{\frac{F+P}{2}})$

C= 25 cuopon payment 1,000 x 5% / 2 becayse paymenr are semiannually

F= 1000 the face value is 1,000

P= 910 the present value or market value is 91% of the face value

n= 50 25 year at 2 payment per year

$YTM = 2 \times (\frac{25 + \frac{1000-910}{50 }}{\frac{1000+910}{2}})$

dividend 26.8

divisor 955

YTM 5.6125654%

This will be the pretax cost of debt

then we calculate the after tax cost of debt

pre-tax cost of debt ( 1 - t ) = after-tax

5.61% ( 1 - .24 ) = 4,2636

6 0

3 years ago

Recession, inflation, and high interest rates are economic events that are best characterized as being a. systematic risk factor

Shalnov [3]

Answer:

The correct answer is letter "B": among the factors that are responsible for market risk.

Explanation:

Market risk is the threat of an investment value falling due to factors that affect all market-wide investments. Investors always take on a certain level of risk. There is always the risk that their investments do not achieve expected returns. The risk falls into two categories: Systematic risk and Unsystematic Risk.

Interest rates fluctuations, recession, and inflation are considered market risks.

3 0

3 years ago

Suppose there are 2,000 people who are unemployed as a result of cyclical unemployment and 1,000 people who are unemployed as a

olga55 [171]

Answer:

1,000

Explanation:

Suppose the town of Boone has a total population of 50,000 people. Of those, 45,000 people are employed. There are 1,000 full-time students who are not employed or actively seeking work. The rest of the people are out of work but have been actively seeking work within the past four weeks.

This information is not given in the question.

For computing the frictional unemployment, first we have to determine the unemployed which is shown below:

Number of unemployed would be

= Total population - employed - full time students

= 50,000 - 45,000 - 1,000

= 4,000

Now the frictional unemployment would be

= Unemployed - cyclical unemployment - structural unemployment

= 4,000 - 2,000 - 1,000

= 1,000

5 0

3 years ago