Assume an economy with a coal producer, a steel producer, and some concumers (no

Question

Assume an economy with a coal producer, a steel producer, and some concumers (no gov.) in a given year, the coal producter produces 15M tons of coal and sells it for $5 a ton. the coal producer pay $50M in wages to consumers. the steel producer uses 25M tons of coal as an input into steel production, all purchased at $5 a ton. of this, 15M tons of coal comes from the domestic coal producer and 10M tons is imported. The steel producer produces 10M tons of steel and sells it for $20 ton. domestic consumers buy 8M tons of steel, and 2M tons are exported. the steel producer pays consumers $40m in wages. All profits made by domestic producers are distributed to domestic consumers.
1. determine the expenditure approach?

Explanation / Answer

All revenue of domestic companies (amount produced X market price) and all wages paid to domestic consumers affect the GDP positively while all imports from foreign companies affect it negatively. In this question that means that GDP= (the amount of coal produced domestically X $5) + (wages paid to domestic coal workers) + (amount of steel produced domestically X $20) + (wages paid to domestic steel workers) -(the amount of coal that is imported X $5) GDP= 15,000,000 ($5) + $50,000,000 + 10,000,000($20) +$40,000,000 - 10,000,000($5)

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