Consider the economy of the country of "Apple Island". There are two firms in this economy, "Apple Co." and "Squashed Apple Co." Apple Co. grows apples on its apple farm, employing workers. It sells $50 of apples to Squashed Apple Co. and $40 of apples to consumers for the consumers to eat. It also keeps $10 of apples in inventory. Apple Co. pays $70 wages to its workers and keeps the remainder as profits. Squashed Apple Co. owns a special flat rock that allows it to squash the apples that it buys from Apple Co. into a flattened apple pancake that the consumers seem to like. It buys $50 of apples from Apple Co., squashes them, and then sells $100 of squashed apples to consumers. Squashed Apple Co. pays $10 in wages to its workers, keeping the remainder in profits.

(a) Calculate GDP in this economy using 3 methods: expenditure method, income method and value-added method.

(b) Does "Squashed Apple Co." use only labor to produce its squashed apples, or labor and capital? Explain