Consider the given simple economy. Sheepnip Co. makes sheep feed. Better-bald In
ID: 1138966 • Letter: C
Question
Consider the given simple economy. Sheepnip Co. makes sheep feed. Better-bald Inc. purchases sheep feed for the sheep it raises and sells wool. Sweeter Sweaters Inc. makes and sells wool sweaters Sheepnip Co.Better-bald Inc.|Sweeter Sweaters Inc. Sheep feed Wool Wages Interest payments Rent Profits $0 $0 $700 $400 $600 $100 $1800 $0 $300 $100 $%200 $750 $0 $3150 $550 $50 $3200 $800 What is the total payments income) to factors of Better-bald Inc.? What is the total payments (income) to factors of Sweeter Sweaters Inc.? What is the GDP for this economy?Explanation / Answer
1. Rent, wages, interest payment and profits are the payments to factors of Better-bald Inc. = 300 + 100 + 200 + 750= $1350.
2. Rent, wages, interest payment and profits are the payments to factors of Sweeter Sweater Inc = 550 + 50 + 3200 + 800 = $4600.
3. GDP from income method is the summation of payment to factor of production by the entreprises in the economy who employ the factor of production.
The given economy has three enterprises. The payment to factor of production by two entreprises are calculated already.
Payment to factors by Sheeping Co = 700 + 400 + 600 + 100 = $1800.
GDP = $1350 + $4600 + $1800
GDP = $7750.