Answer to Question #228032 in Macroeconomics for Rahman

Question

Consider an economy’s production is as follows: 1 million pounds of bread (sold at Rs. 2.00 each); 1.2 million pounds of flour (sold at Rs. 1.00 per pound) and 2.3 million pounds each of yeast, sugar & salt (all sold at Rs. 1.00 per pound). Calculate:

a. Output of the economy. (1 mark)

b. Total income of the economy. (2 marks)

Answer 1

a. Output of the economy is 1 Million multiply by Rs. 2 which equals to Rs. 2 Million

Flour, yeast, sugar and salt are intermediary consumption

Value of output in economy is Rs. 2 million$-$ $($ Rs. 1.2$+$ Rs. 2.3$)$ $=$ $-$ Rs. 1.5 million

b. Total income of the economy is the value of final goods $($ bread$)$. Which is 1 million multiply by Rs. 2$=$ Rs. 2 million