Calculate and compare the growth rate of real GDP using the three approaches.

  1. The following transactions occurred in a given year. Firm A manufactures leather using a

factory valued at $20,000. Suppose Firm A produced $2,000 worth of leather and incurred

the following costs: $1,000 for the salaries of workers, $100 for interest payments on a

bank  loan,  and  taxes  of  $200.  Firm  A  sold  all  of  its  leather  to  Firm  B,  which  is  a

manufacturer of luxury bags. Suppose Firm B produced four bags at a cost of $800 each.

The cost of each bag consisted of paying for $500 worth of raw materials, paying for the

salaries of workers for $200, and $100 in taxes. Firm B has a factory valued at $30,000.

Firm B sold to the public three of its four bags for $1,000 each. Calculate the contribution

to GDP using the following:

1)  Production approach.

2)  Income approach.

3)  Expenditure approach

 

2 .   Consider a two-good (A and B), two-period (year 1 and year 2) economy. In year 1, the

economy produced 10 units of A at a per unit price of $1 and 5 units of B at a per unit price

of $2. In year 2, the economy produced 15 units of A at a per unit price of $1 and 5 units

of B at a per unit price of $3. Calculate real GDP for years 1 and 2 using the following

methods:

1)  Laspeyres.

2)  Paasche.

3)  Fisher.

4)  Calculate and compare the growth rate of real GDP using the three approaches.

 

  1. 3. Mankiw, page 42, question 2. A farmer grows a bushel of wheat and sells it to a miller for

$1. The miller turns the wheat into flour and then sells the flour to a baker for $3. The

baker uses the flour to make bread and sells the bread to an engineer for $6. The engineer

eats the bread.

1)  What is the value added by each person?

2)  What is the bread’s contribution to GDP?

 

  1. Mankiw, page 42, question 3. Suppose a woman marries her butler. After they are married,

her husband continues to wait on her as before, and she continues to support him as before

(but as a husband rather than an employee).

 

1)  How does the marriage affect GDP? (Note: That is, the butler is treated as a husband,

not as an employee)

2)  How should it affect GDP? (Note: That is, the butler is treated as an employee, not as

a husband)

Are you looking for a similar paper or any other quality academic essay? Then look no further. Our research paper writing service is what you require. Our team of experienced writers is on standby to deliver to you an original paper as per your specified instructions with zero plagiarism guaranteed. This is the perfect way you can prepare your own unique academic paper and score the grades you deserve.

Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.

Type of paper Academic level Subject area
Number of pages Paper urgency Cost per page:
 Total: