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Suppose an economy produces steel, wheat, and oil. The steel industry produces $100,000 in revenue, spends $4,000 on oil, $10,000 on wheat, pays workers $80,000. The wheat industry produces $150,000 in revenue, spends $20,000 on oil, $10,000 on steel, and pays workers $90,000. The oil industry produces $200,000 in revenue, spends $40,000 on wheat, $30,000 on steel, and pays workers $100,000. There is no government. There are neither exports nor imports, and none of the industries accumulate or decumulate inventories. Output not sold to other sectors is sold as final goods. 1. Summarize this information in a table similar to the one in the lecture notes. 2. Calculate GDP using the production and income methods. Show your calculations.

Suppose an economy produces steel, wheat, and oil. The steel industry produces $100,000 in revenue, spends $4,000 on oil, $10,000 on wheat, pays workers $80,000. The wheat industry produces $150,000 in revenue, spends $20,000 on oil, $10,000 on steel, and pays workers $90,000. The oil industry produces $200,000 in revenue, spends $40,000 on wheat, $30,000 on steel, and pays workers $100,000. There is no government. There are neither exports nor imports, and none of the industries accumulate or decumulate inventories. Output not sold to other sectors is sold as final goods. 1. Summarize this information in a table similar to the one in the lecture notes. 2. Calculate GDP using the production and income methods. Show your calculations.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Suppose an economy produces steel, wheat, and oil. The steel industry produces $100,000 in revenue, spends $4,000 on oil, $10,000 on wheat, pays workers $80,000. The wheat industry produces $150,000 in revenue, spends $20,000 on oil, $10,000 on steel, and pays workers $90,000. The oil industry produces $200,000 in revenue, spends $40,000 on wheat, $30,000 on steel, and pays workers $100,000. There is no government. There are neither exports nor imports, and none of the industries accumulate or decumulate inventories. Output not sold to other sectors is sold as final goods. 1. Summarize this information in a table similar to the one in the lecture notes. 2. Calculate GDP using the production and income methods. Show your calculations. 3. A government is introduced. First consider this policy: the government taxes oil producers $10,000, and distributes this revenue to workers. Recalculate GDP using the income approach. 4. Now consider this policy: the government taxes oil producers $10,000, and uses the revenue to purchase steel. (Assume that total steel production is unchanged.) Recalculate GDP. 5. Now assume that the wheat producer uses $10,000 of imported fertilizer. Output is unchanged. There are no exports. Again, calculate GDP using the production and income methods. Show your calculations.
Transcribed Image Text:Suppose an economy produces steel, wheat, and oil. The steel industry produces $100,000 in revenue, spends $4,000 on oil, $10,000 on wheat, pays workers $80,000. The wheat industry produces $150,000 in revenue, spends $20,000 on oil, $10,000 on steel, and pays workers $90,000. The oil industry produces $200,000 in revenue, spends $40,000 on wheat, $30,000 on steel, and pays workers $100,000. There is no government. There are neither exports nor imports, and none of the industries accumulate or decumulate inventories. Output not sold to other sectors is sold as final goods. 1. Summarize this information in a table similar to the one in the lecture notes. 2. Calculate GDP using the production and income methods. Show your calculations. 3. A government is introduced. First consider this policy: the government taxes oil producers $10,000, and distributes this revenue to workers. Recalculate GDP using the income approach. 4. Now consider this policy: the government taxes oil producers $10,000, and uses the revenue to purchase steel. (Assume that total steel production is unchanged.) Recalculate GDP. 5. Now assume that the wheat producer uses $10,000 of imported fertilizer. Output is unchanged. There are no exports. Again, calculate GDP using the production and income methods. Show your calculations.
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