What is the final value of goods and services?
Consider an economy with three firms: • Firm 1 sells $75 of steel to Firm 3. From its earnings, it pays $25 in wages and keeps $50 in profits. • Firm 2 sells $30 of rubber to Firm 3. Firm 2 pays $10 in wages and keeps $20 in profits. • Firm 3 sells $240 of cars to households. It pays for its inputs (from Firm 1 and Firm 2); keeps one third of its remaining earnings as profits,and pays two thirds in wages. Let’s calculate GDP various ways. (a) What is the final value of goods and services?
