In 2020, a simple economy relied on three sectors: manufacturing, professional services, and agriculture: A total output of $165 of agriculture are produced. Of those, $100 are external demand, $20 go back to agriculture, $30 is sold to manufacturing, and $15 is sold to professional services. A total output of $90 of manufacturing services are produced. Of those, $35 are external demand, $15 go back to manufacturing, $10 are sold to agriculture, and $30 are sold to professional services. A total output of $60 of professional services are produced. Of those, $35 are external demand, none go back to professional services, $15 is sold to agriculture, and $10 to manufacturing services. Suppose in 2020o, external demand changes: agriculture doubles in demand and manufacturing demand is reduced by 50%. What is the total production of each sector?

In 2020, a simple economy relied on three sectors: manufacturing, professional services, and agriculture: A total output of $165 of agriculture are produced. Of those, $100 are external demand, $20 go back to agriculture, $30 is sold to manufacturing, and $15 is sold to professional services. A total output of $90 of manufacturing services are produced. Of those, $35 are external demand, $15 go back to manufacturing, $10 are sold to agriculture, and $30 are sold to professional services. A total output of $60 of professional services are produced. Of those, $35 are external demand, none go back to professional services, $15 is sold to agriculture, and $10 to manufacturing services. Suppose in 2020o, external demand changes: agriculture doubles in demand and manufacturing demand is reduced by 50%. What is the total production of each sector?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q1. An economy has the following sectors: private households, government, flour producers and bread producers. The government levies a value added tax (VAT) on both flour and bread of 10%. In 2010 flour producers pay their workers $200 and sell 300 kilos of flour to the bread makers and 240 kilos of flour to final consumers. The net price for one kilo of flour is $0.5. The bread producers pay their workers $220 and sell 175 kilo bread to domestic consumers. Moreover, 75 kilos of bread are exported (the VAT levied by the government also applies to exported goods). The net price for one kilo of bread is $2. (a) Describe briefly the three possibilities to calculate GDP. (b) What is the GDP of this economy using the three possibilities? Are your answers the same for the three possibilities? If Yes, Explain. (c) Calculate the shares of GDP attributable to labor income, capital income and indirect taxes.
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