Recall the production frontier (ppf) model from intro Econ ( refer to the basic butter and guns graph that could be found on Wikipedia).
What are the exogenous variables in this model and what are the endogenous variables? Briefly explain.
Consider a simple economy consisting of only four firms. Firm A, a mining enterprise, extracts iron ore. Firm B, a Steelmaker, produces steel sheets. Firm C, a carmaker, makes automobile while Firm D produces automobile tires.
In 2016, firm A extracts 50,000 tons of ores, valued at $200 per ton, using previously existing machinery. Firm B produces 10,000 tons of steel sheets, valued at $3000 per ton, having bought and used all of the ore produced by Firm A. Firm C manufactured 5000 vehicles and sold them all to households for 20,000 each, having purchased 8000 tons of steel sheets from Firm B. In addition, Firm C imported 5000 engines from a foreign subsidiary, each valued at $5000, and purchased 20,000 tires from Firm D for $100 each. Firm D produced 100,000 tires valued at $100 each, but only sold 60,000 tires during 2016. Firm D purchased 2000 tons of steel sheets from Firm B since all of their tires are steel belted radials.
Calculate GDP in 2016 for this economy using the production approach (valu added). Also, calculate GDP in 2016 using the expenditure approach.
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