3. Andrewâ??s problem. An economy produces three goods: cars, guns, and blueberries. The price of ea

3. Andrew’s problem. An economy produces three goods: cars, guns, and blueberries. The price of each is $2.(a) Households buy 5 houses and 45 apples, eating them. The government buys 5 guns. There is no other economic activity. What are the values of the different components of GDP (consumption, investment, government spending, exports/imports)?(b) The next year, households buy 5 houses and 45 apples. The government buys 5 guns. Farmers take the seeds from 5 more apples and plant them. Households then sell 5 apples to France for $2 each and buy 5 bananas from Mexico for $4 each, eating them too. What are the values of the components of GDP?(c) Return to the economy in part 3a. The government notices that the two richest households consume 20 apples each, while the ten poorest consume one each. It levies a tax of 15 apples on each of the rich households, and gives 3 apples each to the 10 poorest households. All other purchases by households and the government are the same as in (a). Calculate the components of GDP.

 

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