Microsoft Word - Rec02_nosol.docx

Exercise 1:

There are two firms in the economy of Venus. Firm A produces wheat and Firm B produces bread.
Firm A sells 10 units of wheat to Firm B at a price of $70/unit. It employs 10 workers at a price of $10 per worker and pays $50 in rents to domestic landowners. It buys a tractor from Mars at the price of $300 for future production.

Firm B imports 5 units of sugar from Mars at a price of $5/unit and buys 10 unit of wheat from Firm A at a price of $70/unit. It pays $200 in interest payments and employs 5 workers at a price of $10/worker. It sells 10 units of bread at a price of $100/unit to domestic consumers and 2 unit of bread at a price of $200/unit to Martian consumers.

The consumers on Venus also purchase 5 units of fish from Mars at a price of $10/unit. a) Compute Venus's GDP using the

a) expenditure approach.
b) Compute Venus's GDP using the income approach.
c) Compute Venus's GDP using the value added approach.