Consider the following open economy. Natural Resources Revenues Wages = = 3000 1000 Cost of Manufacturing...

 

Transcribed Image Text:

Consider the following open economy. Natural Resources Revenues Wages = = 3000 1000 Cost of Manufacturing Service Sector Revenues = 3000 Wages = 1500 Cost of 500 Manufacturing 1000 Manufacturing Revenues Wages = Services 4000 2000 Cost of - 500 Cost of Nat. Resources = Government Tax = ? Transfers ? Service Expenditures 150 Manufacturing 500 Expenditures = 150 Furthermore, the flat labor-income tax rate levied on households is 20%, the flat tax rate on profits levied on firms is 10%. Assume that taxes on profits are levied on firms before firms distribute the profits to the households. The government runs a budget deficit, and the deficit amounts to 20% of the tax revenues. 25% of the manufacturing products are exported to foreign countries, and the natural resources that are not used by the manufacturing sector are exported. Based on the information above, answer the following questions. (a) (10 points) Fill the missing parts in the table above and calculate the before and after tax and transfers income of households. (b) (5 points) What are the exports in this economy? (c) (10 points) Calculate the GDP using all three approaches (Hint: use government ex- penditures for the value-added approach). Consider the following open economy. Natural Resources Revenues Wages = = 3000 1000 Cost of Manufacturing Service Sector Revenues = 3000 Wages = 1500 Cost of 500 Manufacturing 1000 Manufacturing Revenues Wages = Services 4000 2000 Cost of - 500 Cost of Nat. Resources = Government Tax = ? Transfers ? Service Expenditures 150 Manufacturing 500 Expenditures = 150 Furthermore, the flat labor-income tax rate levied on households is 20%, the flat tax rate on profits levied on firms is 10%. Assume that taxes on profits are levied on firms before firms distribute the profits to the households. The government runs a budget deficit, and the deficit amounts to 20% of the tax revenues. 25% of the manufacturing products are exported to foreign countries, and the natural resources that are not used by the manufacturing sector are exported. Based on the information above, answer the following questions. (a) (10 points) Fill the missing parts in the table above and calculate the before and after tax and transfers income of households. (b) (5 points) What are the exports in this economy? (c) (10 points) Calculate the GDP using all three approaches (Hint: use government ex- penditures for the value-added approach).

Answer rating: 100% (QA)

Before tax and transfers the households income is 30004000200050010001500 After tax and transfers th... View the full answer