1. Consider a simple example economy where there are three companies. Gelato Inc. is an Italian company that produces ice cream; it is located in St. Louis but owned by an Italian chemist who sends from time to time secret formulas for new flavors. Milky Way is a milk producer in the St. Louis area. Finally, Sweetyou is a sugar producer, also located in St. Louis. In 2019, Gelato Inc. produced and sold to consumers $500 worth of ice cream, using $50 of sugar and $100 of milk. It also paid $150 in wages and $50 in taxes. Milky Way produced $200 worth of milk. It sold $100 to Gelato Inc. and $100 to the consumers. It paid $100 in wages, $20 in interests on a previous loan, and $30 in taxes. Sweetyou produced $200 worth of sugar, of which $50 was sold to Gelato Inc., $100 was exported to France, and the remaining was unsold. Sweetyou paid wages for $100 and $40 in taxes. The government in this St. Louis based economy provides public services for which it employs labor and basic income for the poor. In 2019, the government paid wages for $50 and made transfers for $70. a. Compute GDP for this simple economy using the product approach. b. Compute GDP for this simple economy using the expenditure approach. c. Compute GDP for this simple economy using the income approach.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Consider a simple example economy where there are three companies. Gelato Inc. is
an Italian company that produces ice cream; it is located in St. Louis but owned by an
Italian chemist who sends from time to time secret formulas for new flavors. Milky
Way is a milk producer in the St. Louis area. Finally, Sweetyou is a sugar producer,
also located in St. Louis.
In 2019, Gelato Inc. produced and sold to consumers $500 worth of ice cream, using
$50 of sugar and $100 of milk. It also paid $150 in wages and $50 in taxes.
Milky Way produced $200 worth of milk. It sold $100 to Gelato Inc. and $100 to the
consumers. It paid $100 in wages, $20 in interests on a previous loan, and $30 in
taxes.
Sweetyou produced $200 worth of sugar, of which $50 was sold to Gelato Inc., $100
was exported to France, and the remaining was unsold. Sweetyou paid wages for
$100 and $40 in taxes.
The government in this St. Louis based economy provides public services for which it
employs labor and basic income for the poor. In 2019, the government paid wages for
$50 and made transfers for $70.
a.
Compute GDP for this simple economy using the product approach.
b.
Compute GDP for this simple economy using the expenditure approach.
c. Compute GDP for this simple economy using the income approach.
d. What is GNP for this economy?

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GDP

A country's gross domestic product (GDP) is a financial indicator of the total market value of all the finished goods and services it generated during a given time frame.
This measurement is frequently reviewed before being regarded as a valid indicator due to its subjective and complicated character.
A country's gross domestic product (GDP) is a financial indicator of the total market value of all the finished goods and services it generated during a given time frame.
This measurement is frequently reviewed before being regarded as a valid indicator due to its subjective and complicated character.

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