The COVID-19 pandemic has led to shutdown of many businesses and high unemployment in the US….

1. The COVID-19 pandemic has led to shutdown of many businesses and high unemployment in the US. Meanwhile, surgical masks are in high demand. Suppose in this context, SM Inc., a producer of surgical masks, had managed to overcome the health hazard and continue its operations, producing $15 million worth of masks during first quarter of 2020 (2020Q1). It sold all its production in that quarter as well as $5 million worth of masks that it had in its inventory at the beginning of the year and that were produced in 2019. If the production cost of these inventory masks in 2019 was $4 million, how much did the activities of SM Inc. contribute to the GDP in 2020Q1? Please remember to explain your answer in detail in addition to providing the calculated answer. [15] Answer: 2. Under the chain rule, we compare the GDP of each two consecutive years in terms of prices that prevail in the earlier year. For example, to compare 2017 and 2018, we must first calculate GDP in both years in 2017 prices. Consider an economy that produces only two goods, bread and cheese. The following statistics are available about this economy. In the following questions, round your answers to two decimal places.

 

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