2. Consider the following artificial economy and use all three ways of defining GDP (i.e., the total valueof final goods and services, the sum of value-added and the sum of income) to measure GDP for thiseconomy:This economy is a fictional island economy that consists of (i) Coconut producer; (ii) Restaurant; (iii)Consumers and (iv) Government.ECON 2123: Macroeconomics Problem Set 1 Instructor: Yao Amber Li2(i) Coconut producer:o Total revenue: $ 20mo Wages: $ 5mo Interest on loan: $0.5mo Taxes: $1.5mo After-tax profits: $ 13m(ii) Restaurant:o Total revenue: $ 30mo Cost of coconuts: $ 12mo Wage: $4mo Taxes: $3mo After-tax profits: $ 11m(iii) Governmento Tax revenue: $5.5mo Wages: $5.5m(iv) Consumerso Wage income: $14.5mo Interest income: $0.5mo Taxes: $1mo Profits distributed: $ 24m

The GDP of this economy can be calculated in three ways:

1. Total value of final goods and services: This is the sum of the total revenue of the coconut producer and the restaurant. This is because these are the only two sectors that produce goods and services in this economy. So, GDP = $20m (coconut producer) +$30m (restaurant) = $50m.

2. Sum of value-added: This is the sum of the value added at each stage of production. For the coconut producer, the value added is the total revenue ($20m). For the restaurant, the value added is the total revenue ($30m) minus the cost of coconuts ($12m). So, GDP =$20m (coconut producer) + ($30m -$12m) (restaurant) = $38m.

3. Sum of income: This is the sum of all the incomes in the economy. This includes wages ($5m for coconut producer,$4m for restaurant, $5.5m for government, and$14.5m for consumers), interest on loan ($0.5m), taxes ($5.5m), and after-tax profits ($13m for coconut producer and$11m for restaurant). So, GDP = $5m (wages for coconut producer) +$4m (wages for restaurant) + $5.5m (wages for government) +$14.5m (wages for consumers) + $0.5m (interest on loan) +$5.5m (taxes) + $13m (after-tax profits for coconut producer) +$11m (after-tax profits for restaurant) = $59m.

Note: There seems to be a discrepancy in the calculations. The sum of value-added and the sum of income should ideally be equal to the total value of final goods and services. However, in this case, they are not. This could be due to some missing information or errors in the given data.