Problem 2: An economy has the following sectors: private households, government, grape producers and wine producers. The government levies a sales tax (VAT) on both grape and wine of 20%. The grape producers pay their workers $500 and sell 600 kilos of grape to the wine producers and 200 kilos of grape to final consumers. The net price for one kilo of grape is $4. The wine producers pay their workers $700 and sell 500 bottles of wine to domestic consumers. Moreover, 100 bottles of wine are exported. The net price for one bottle of wine is $10. A) Describe in detail the three possibilities of calculating GDP. B) Calculate the GDP for the economy described above using each of these three possibilities.
Problem 2: An economy has the following sectors: private households, government, grape producers and wine producers. The government levies a sales tax (VAT) on both grape and wine of 20%. The grape producers pay their workers $500 and sell 600 kilos of grape to the wine producers and 200 kilos of grape to final consumers. The net price for one kilo of grape is $4. The wine producers pay their workers $700 and sell 500 bottles of wine to domestic consumers. Moreover, 100 bottles of wine are exported. The net price for one bottle of wine is $10. A) Describe in detail the three possibilities of calculating GDP. B) Calculate the GDP for the economy described above using each of these three possibilities.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Problem 2: An economy has the following sectors: private
households, government, grape producers and wine producers.
The government levies a sales tax (VAT) on both grape and wine
of 20%. The grape producers pay their workers $500 and sell
600 kilos of grape to the wine producers and 200 kilos of grape
to final consumers. The net price for one kilo of grape is $4. The
wine producers pay their workers $700 and sell 500 bottles of
wine to domestic consumers. Moreover, 100 bottles of wine are
exported. The net price for one bottle of wine is $10.
A) Describe in detail the three possibilities of calculating GDP.
B) Calculate the GDP for the economy described above using
each of these three possibilities.
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