Consider a Simple Economy Consisting of Three Sectors: Food, Clothing

question 257

Multiple Choice

Consider a simple economy consisting of three sectors: food, clothing, and shelter. The production of 1 unit of food requires the consumption of 0.4 unit of food, 0.2 unit of clothing, and 0.4 unit of shelter. The production of 1 unit of clothing requires the consumption of 0.3 unit of food, 0.4 unit of clothing, and 0.1 unit of shelter. The production of 1 unit of shelter requires the consumption of 0.2 unit of food, 0.1 unit of clothing, and 0.2 unit of shelter. Find the level of production for each sector in order to satisfy the demand for $100 million worth of food, $30 million worth of clothing, and $290 million worth of shelter. Round the answers to the nearest tenth.

• A) $696.5 million worth of food
• $358.8 million worth of clothing
• $358.8 million worth of shelter
• B) $578.2 million worth of food
• $358.8 million worth of clothing
• $696.5 million worth of shelter
• C) $478.2 million worth of food
• $328.8 million worth of clothing
• $406.5 million worth of shelter
• D) $696.5 million worth of food
• $328.8 million worth of clothing
• $578.2 million worth of shelter
• E) $328.8 million worth of food
• $406.5 million worth of clothing
• $578.2 million worth of shelter

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Definitions:

AFN Formula

Additional Funds Needed formula, a financial tool used to estimate the additional amount of financing a firm will require in the future.

Forecasting Method

Techniques used to predict future aspects of a business or the economy, from sales to macroeconomic trends.

AFN Formula

Additional Funds Needed formula; a financial model that projects the additional financing required by a firm to support its desired level of growth.

Dividend Payout Ratio

The proportion of earnings a company pays to its shareholders in the form of dividends, typically represented as a percentage of the company’s net income.