Question

Adam owns Chipcorp, a company that makes computer chips. It sold 700 chips to Widgetcorp and exported 1,000 chips abroad. The price of a chip is $100. Chipcorp bought silicon wafers from abroad for its production process worth $70,000. Also Chipcorp employs an engineer, Becca, at a salary of $60,000.

Clarice owns Widgetcorp, a company that makes widgets. Widgetcorp sold 650 widgets to domestic consumers and exported 50 widgets abroad. The price of a widget is $220. Widgetcor employs only Drew, a designer, with a salary $45,000. (All the manufacturing is done by robots.) Suppose that the country imported 5,000 burgers from Barland at a price of $7 per burger. (The burgers are consumed by the Techland residents.)

a.) Find GDP using the expenditure approach. b.) Find GDP using the income approach. c.) Find GDP using the production (value-added) approach. d.) Suppose that next year everything stays the same with the exception that Chipcorp buys a new chip fabrication machine from abroad at a price of $20,000. Recompute GDP using the expenditure approach. (Hint: the machine will be used for some time, so it is not an intermediate good. What kind of a purchase is it?)

Answer 1