Reference no: EM132110687

Consider an economy that produces only two goods: oil and gasoline. In this economy, the technology of producing gasoline involves using oil as an input. Olive's Oil is the only company that produces Oil, while George's Gasoline is the only producer gasoline. The relevant revenue and cost information for each of the two firms in the economy is given below:

           Georges's

           Revenue from selling gasoline:                                  $4,800,000

           Cost of buying fresh oil from Olive:                          1,300,000

           Interest on funds borrowed to buy refinery:                   900,000

           Wages paid to employees                                             1,200,000

           Taxes                                                                               500,000    

           Olive's

           Revenue from oil:                                                       $1,300,000

           Rent on land (including mineral rights)                           400,000    

           Wages to employees                                                        500,000

           Taxes                                                                               300,000

Calculate nominal GDP using (a) the expenditure approach (b) the production (value added) approach, and (c) the income approach. (Hint: the three approaches give the same number for the Nominal GDP).