Accounting system-example ii, Macroeconomics

ACCOUNTING SYSTEM-EXAMPLE

Let us now introduce a complication. There are three firms in the production sector. The Fruit Extracts Company manufactures from raw fruit, fruit extracts with the help of labor. All of this is sold to Jam Co., which processes it and converts it into jam. The jam is sold in bulk to Bottling and Distribution Co., which sells it to the households. As before the firms are owned by some of the households labor is also supplied by households. One year's accounts are as follows: 

                                                  Fruit Extracts Co. 

                    969_Production Account.png

                                                 Jam Co. 

                  1735_Production Account.png

                                      Bottling and Distribution Co. 

                     1709_Production Account.png

For this economy, the market value of outputs now is Rs.120 worth of extracts, Rs.220 worth of bulk jam and Rs.300 worth of bottled jam, a total of Rs.640. The value of all factor payments is Rs.300 consisting of Rs.230 of wages and salaries and Rs.70 of profits. Should we still define GNP as market value of all outputs? Obviously not, because we would be double counting. The value of bottled jam already contains in it the value of bulk jam which in turn contains in it the value of extracts. From the total value of all outputs we should net out the value of all intermediate inputs, i.e. those goods which are used up as inputs in the production of other goods. Thus GNP is the market value of outputs of final goods and services - those which are not further processed into some other goods but are directly consumed. In this case only bottled jam is the final good. Therefore GNP is Rs.300 which equals GNI as it should since all purchases of bottled jam are financed out of incomes earned. 

 

Posted Date: 9/12/2012 7:35:52 AM | Location : United States







Related Discussions:- Accounting system-example ii, Assignment Help, Ask Question on Accounting system-example ii, Get Answer, Expert's Help, Accounting system-example ii Discussions

Write discussion on Accounting system-example ii
Your posts are moderated
Related Questions
Question 1: (a) Distinguish between the short run and long run profits of a competitive firm by using graphical representations. (b) Compare and contrast between perfect c

Compare and contrast federal government expenditures, state and local government expenditures, and financing government expenditures. Suggest a total of three actions that should b

1. An unemployed individual decides to spend the day fishing. The opportunity cost of fishing is equal to A) The cost of bait and any other monetary expenses. B) Zero, becaus

Trends in current account: A  glance at  the net invisible  account suggests that its  ever-  rising  trend  from 2000-01 did not  only support  the  massive trade deficit but

Q. Explain about IS-LM-model? The key difference between the IS-LM model and the cross model is that nominal interest rate is exogenous in cross model on the other handit is en

Q1. The poorest countries in the world have a per capita income of about $600 today. We can reasonably assume that it is nearly impossible to live on an income below half this leve

critically analyse the ways at which the govement of zimbabwe has put in place to address unequal employment opportunitiesbetween men andwomen

Aggregate Supply in the Short Run Production takes place in business sector on the basis of an expected price for its output. However, costs are incurred in anticipation of sa

INTRODUCTION TO DEMAND ANALYSIS: It is generally seen that market demand curve is downward sloping. Market demand curve (or sometimes called Aggregate demand curve) is nothing

what is the role of advertising in baumol''s model?