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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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