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Questions › JNU › JNU SSS 2017 › Q44
5 marksMacroeconomics › National income accounting › The expenditure methodHardabout 8 min

JNU SSS 2017 Question 44: National income accounting

The production sector of a closed economy consists of only two firms, AAA and BBB, which produce products xxx and yyy respectively. xxx is exclusively an intermediate good and the only intermediate used in the production of both xxx and yyy, while yyy is the final good. The unit prices of xxx and yyy are ₹ 5 and ₹ 10 respectively. The stocks of unused or unsold xxx and yyy held by the two firms at the beginning and at the end of the year are given in the table below :

Stocks at Year Beginning (no. of units) - xxxStocks at Year Beginning (no. of units) - yyyStocks at Year End (no. of units) - xxxStocks at Year End (no. of units) - yyy
Firm AAA200250
Firm BBB10102020

If firm BBB's sales in the year are ₹ 10,000, determine the economy's GDP in that year.

Answer and worked solution

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Plain-text version

The production sector of a closed economy consists of only two firms, A and B, which produce products x and y respectively. x is exclusively an intermediate good and the only intermediate used in the production of both x and y, while y is the final good. The unit prices of x and y are ₹ 5 and ₹ 10 respectively. The stocks of unused or unsold x and y held by the two firms at the beginning and at the end of the year are given in the table below: | Stocks at Year Beginning (no. of units) - x | Stocks at Year Beginning (no. of units) - y | Stocks at Year End (no. of units) - x | Stocks at Year End (no. of units) - y | Firm A | 20 | 0 | 25 | 0 | Firm B | 10 | 10 | 20 | 20 | If firm B 's sales in the year are ₹ 10,000, determine the economy's GDP in that year.

National income accounting has come up 132 times in 6 exams since 2010.

What this question tests

This question is on The expenditure method, part of National income accounting in Macroeconomics.

Measuring GDP as consumption, investment, government spending and net exports.

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Question from the JNU SSS 2017 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.