Consider an economy which consists of three firms, A, B, and C, consumers, and a government. Firm A is a smart phone factory, while Firm B is a parts factory. Firm C is a smart phone retailer. In 2020, Firm B produces $250,000 worth of parts, of which $150,000 it sells to Firm A, and $40,000 to Firm C. In addition Firm B sells $30,000 worth of parts to the government, and $30,000 worth of parts it exports. Firm B pays workers $140,000. Firm A produces smart phones worth $400,000, out of which $250,000 it sells to the smart phone retailer (Firm C), $80,000 it sells to the government, and $70,000 worth of smart phones it stores as inventory to be sold the following year. The smart phone factory (Firm A) uses imported materials from China worth $25,000. The smart phone factory pays workers $100,000 and $20,000 in taxes to the government. The smart phone retailer (Firm C) sells $380,000 worth of smart phones: $340,000 worth to domestic consumers, and $40,000 to foreign consumers in the United States. The smart phone retailer pays taxes $40,000 to the government and $50,000 to the workers for marketing and sales. Consumers receive $50,000 as dividends from abroad. The profits of firms A and C are distributed to domestic consumers. However, firm B is foreign owned.
(a) (15 marks) Calculate GDP using, the product approach, the expenditure approach, the income approach. Show your work clearly (Note: you will not get marks for simply providing the final number).
(b) (9 marks) Calculate GNP, the current account surplus, and government savings for this economy.
