In the economy of Rohan, there are two firms for which domestic consumers (households) are the only shareholders: a wheat producer (Firm W) and a bread producer (Firm B). Domestic consumers own/supply all the labor services in this economy. Wheat is an input in the making of bread. In the current year, Firm W produced 60,000 bushels of wheat, sold 35,000 bushels to the bread producer at $3 per bushel, and exported 25,000 bushels at $3 per bushel. Firm W pays $50,000 in wages to domestic consumers, and $25,000 in interest (income) on a loan it borrowed from domestic consumers. Firm B produced 50,000 loaves of bread and sold all of it to the domestic consumers at $4 per loaf. Firm B paid domestic consumers $25,000 in wages, and $35,000 in interest (income) on a loan it borrowed from the domestic consumers. In addition to the 50,000 loaves of bread domestic consumers bought from Firm B, they imported and consumed 10,000 packs of beef patties at $3 per pack, and 10,000 gallon of orange juice at $4 per gallon from a foreign country. There are no government purchases and net indirect taxes, rental income, proprietors' income, and depreciation in this economy in this time period. Additionally, domestic consumers own a firm abroad that has earned a profit of $35,000 in the current year under consideration. What is the value of net interest income?

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Introduction In the economy of Rohan there are two firms a wheat producer Firm W and a bread produce... View the full answer