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Problem:

Consider an economy which comprises of the coal producer, steel producer, and some households. In a given year, the coal producer creates 15 tons of coal and sells it at $5 per ton. The coal manufacturer pays $50 in wages to households. The steel manufacturer uses 25 tons of coal as the input to manufacture, all bought at $5 per ton. Of this, 15 tons are from domestic coal producer and 10 tons are imported. The steel manufacturer manufactures 10 tons of steel and sells it at $20 per ton. Domestic households purchase 8 tons and 2 tons are exported. The steel manufacturer pays $40 in wages. All profits made by the domestic manufacturers go to domestic households.

Required:

a. Compute GDP by using each of the three approaches.

b. Compute the current account surplus and GNP. If coal manufacturer is instead owned by foreigners, what is GNP?

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M914021

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