Question: exercise 3 a simple economy consider an economy with three...
Exercise 3. A simple economy. Consider an economy with three domestic agents: Ann, Bill and Carl. And a foreign economy with a representative agent Fer.
Ann owns land and uses the trees in their yard for wood. She cuts down the trees and sells the wood.
Bill owns a firm that buys wood and build and sell tables.
Carl is a retired agent that has some wealth.
There is no government.
During the year the following transactions happen:
o Ann sold 700 pounds of wood at price $10/pound. The other 300 pounds are kept as inventory of the firm.
o Bill bought 500 pounds of wood, produced and sold 100 tables at price $500/table.
o Fer bought 30 tables from Bill and 200 pounds of wood from
o The domestic agents (A, B & C) bought 70 tables from the firm owned by Bill.
o Bill’s capital depreciated by $1000.
Calculate GDP for this economy and do the income decomposition (Wages, Taxes, Net Profits, Depreciation).