Accounting system-example ii, Macroeconomics

Assignment Help:

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. 

 


Related Discussions:- Accounting system-example ii

Is household savings depend on gdp in the cross model, Q. Is Household savi...

Q. Is Household savings depend on GDP in the cross model? Household savings depends on Y since S H = Y - C - NT and C and NT both rely on Y. How it depends on Y can't be concl

Equilibrium in money markit, equilibrium in money market and derivation of ...

equilibrium in money market and derivation of lm curve

Effect of that on the tofu market, New technology was just invented that de...

New technology was just invented that decreases the cost of planting and harvesting soybeans: show the effect of this on the soybean market. Show the effect of that on the tofu mar

Unemployment, critically analyse the ways at which the govement of zimbabwe...

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

Explain about the circular-flow of economic activities, Explain about the c...

Explain about the circular-flow of economic activities. Circular-Flow of Economic Activities: Economic Agents:    a. Households b. Firms Where they interact:

Aggregate supply (as), Aggregate Supply (AS) We now shift our attentio...

Aggregate Supply (AS) We now shift our attention to the supply side of the macroeconomy. Aggregate supply explains the production and pricing side of the economy and the behav

Assignment help, Consider the economic data for Country A: Unemployment lev...

Consider the economic data for Country A: Unemployment level of 15% Natural Rate of Unemployment is 6%. Required Reserves is 25% C = 50 + 0.75Y; I = 600; G = 250 (note: T = 200 for

Explain the determinants of transaction demand, Macro Economics 1. How...

Macro Economics 1. How was the Classical Theory of interest role criticized by Keynes? 2. Illustrate the barter system that was used in early times in lieu of money. 3.

What is quantitative easing, What is Quantitative easing Quantitative ...

What is Quantitative easing Quantitative easing (QE) is an unorthodox monetary policy which since 2009 has been intermittently pursued by Bank of England and US Federal Reserv

Elucidate raising the price profitable., George has been selling 5,000 T-sh...

George has been selling 5,000 T-shirts per month for $8.50. When he increased the price t0 $9.50 he sold only 4,000 T-shirts. What is the demand elasticity? If his marginal cost is

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd