Calculate GDP and value-added tax

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Reference no: EM13819135

There are three firms in an economy: A, B, and C. Firm A buys $400 worth of goods from firm B and $240 worth of goods from firm C, and produces 220 units of output, which it sells at $7 per unit. Firm B buys $130 worth of goods from firm A and $170 worth of goods from firm C, and produces 450 units of output, which it sells at $4 per unit. Firm C buys $200 worth of goods from firm A and $100 worth of goods from firm B. It produces output worth $1,200. All other products are sold to consumers.

Instructions: Round your answers to the nearest whole number.

a. Calculate GDP.

$.

b. If a value-added tax (a tax on the total value added by each firm) of 14 percent is introduced, how much revenue will the government get?

$.

c. How much would government get if it introduced an income tax of 14 percent?

$.

d. How much would government get if it introduced a sales tax of 14 percent on final output?

$

Reference no: EM13819135

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