A Simple Economy Consists of Two Industries: Agriculture and Manufacturing

question 296

Essay

A simple economy consists of two industries: agriculture and manufacturing. The production of 1 unit of agricultural products requires the consumption of 0.4 unit of agricultural products and 0.3 unit of manufactured goods. The production of 1 unit of manufactured products requires the consumption of 0.2 unit of agricultural products and 0.3 unit of manufactured goods.
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Find the gross output of goods if the consumer demand for the output of agricultural goods and the consumer demand for manufactured products are $120 million and $140 million, respectively. Round answers to two decimal places, if necessary.
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$__________ million worth of agricultural goods
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$__________ million worth of manufactured products.
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Find the value of the goods consumed in the internal process of production in order to meet the gross output. Round answers to two decimal places, if necessary.
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$__________ million worth of agricultural goods
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$__________ million worth of manufactured products.

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Definitions:

Investment

The purchase of goods that are not consumed today but used in the future to create wealth, including machinery, buildings, or equipment for production.

Income

is the money received by individuals or entities, typically in the form of wages, salaries, rent, interest, dividends, or profits, for providing labor, capital, or resources.

Aggregate Expenditure Line

The aggregate expenditure line is a graphical representation in macroeconomics that shows all planned expenditures of an economy at different levels of income or GDP, indicating total spending on goods and services in an economy.

Aggregate Demand Curve

A graph that represents the total demand for all goods and services in an economy at various price levels.