Question 1Consider an economy with two firms and a government. Firm 1 produces 10000 units of good X, whichit sells for $20 per unit. It uses this revenue to pay $140000 in wages, $10000 in taxes, and $10000 ininterest on a loan, with the rest as profits. Firm 1 sells some of its output to consumers, and some toFirm 2 as an intermediate good in their production process.Firm 2 uses good X as an input into its manufacturing process. It buys 8000 units of good X and usesthem to create 1000 units of good Y, which it sells for $400 per unit. It pays $200000 in wages and$20000 in taxes, with the rest as profits.The government takes in taxes from only these two firms, and uses it to pay wages to providegovernment services, for instance national defense.Please calculate GDP using the three different methods. (Of course, you'll arrive at the same answer;however, indicate clearly what values you're using in each case to arrive at the final answer, so as toillustrate you know what is included in each method of calculating GDP.)1)Income approach:2)Expenditure approach:3)Product (value-added) approach:

ood X as an input into its manufacturing process. It buys 8000 units of good X 1000 units of good Y, which it sells for $400 per unit. It pays $200000 in wag es, with the rest as profits. =nt takes in taxes from only these two firms, and uses it to pay wages to provid. ervices, for instance national defense. te GDP using the three different methods. (Of course, you'll arrive at the same cate clearly what values you're using in each case to arrive at the final answer, know what is included in each method of calculating GDP.) coach: approach: ue-added) approach:

ood X as an input into its manufacturing process. It buys 8000 units of good X 1000 units of good Y, which it sells for $400 per unit. It pays $200000 in wag es, with the rest as profits. =nt takes in taxes from only these two firms, and uses it to pay wages to provid. ervices, for instance national defense. te GDP using the three different methods. (Of course, you'll arrive at the same cate clearly what values you're using in each case to arrive at the final answer, know what is included in each method of calculating GDP.) coach: approach: ue-added) approach:

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter13: Positive Externalities And Public Goods

Section: Chapter Questions

Problem 9RQ: In what ways (it) company investments in research and development create positive externalities?

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