Use the information below to answer questions 1-6 Consider an economy that produces only two goods: fresh apricots and dried apricots. In this economy, the technology of producing dried apricots is to place fresh apricots on special racks and allow them to dry in the sun. Fannie’s Farms is the only company that grows fresh apricots, while Darryl’s Dried Victuals is the only producer of dried apricots. Fannie’s sells some of its apricots directly to consumers for consumption. The relevant revenue and cost information for each of the two firms in the economy is given below:
Darryl’s Dried Victuals Revenue from selling dried apricots: Cost of buying fresh apricots from Fannie’s: Interest on funds borrowed to buy drying racks: Wages paid to employees Taxes $2,750,000 1,800,000 200,000 550,000 90,000 Fannie’s Farms Revenue from selling fresh apricots: Rent on land (including apricot trees) Wages to employees Taxes $2,350,000 400,000 1,100,000 180,000 Darryl’s profit from selling dried apricots is: $5,390,000 $110,000 None of these are correct $150,000 $670,000 Fannie’s profit from selling fresh apricots is: $4,030,000 $110,000 $670,000 $300,000 None of these are correct
Question 3 3 pts Use the income approach to calculate nominal GDP. Fill in the blanks in the table below. Enter numbers with no commas, no dollar signs and no decimals. For example, if your answer is $12.000 you would enter 12000 into the appropriate box. a. Total wages b. Interest c. Rent d.Total profit* 780000 e. Total taxes f. Nominal GDP =(a+b+c+d+e) “hint: get total profit by adding your answers for #1 and #2!
Now let’s use the expenditure approach to calculate nominal GDP. So here we will add up all consumer spending on FINAL goods in this economy. Remember that the final goods in this economy are fresh apricots and also dried apricots. We have to be careful not to double count here though because some of the fresh apricots produced by Fannie are used by Darryl to make dried apricots. So first we find out how much money consumers spent on each of the final goods: How much money was spent by consumers on Fannie’s fresh apricots? $800,000 $550,000 None of these are correct $2,750,000 $2,300,000
Question 5 3 pts How much money was spent by consumers on Darryl’s dried apricots? None of these are correct $2,300,000 $2,750,000 $800,000 $550,000
Question 6 3 pts Now we are ready to calculate nominal GDP using the expenditure approach. Add up your answers for #4 and #5. What is nominal GDP calculated using the expenditure approach equal to? $3,550,000 $3,100,000 $5,100,000 $3,300,000 None of these are correct
Total 36 Questions (UPDATED 2020)