For a hypothetical economy, assuming there are only two firms (X and Y) with equal values of Gross Value Added (GVA). On the basis of the following data, estimate the values of Domestic Sales by firm X:

Question

Read the following statements carefully:
Statement 1: Under the flexible exchange rate system, a deficit or surplus in the Balance of Payments is automatically corrected.
Statement 2: Under the flexible exchange rate system, there is always a possibility of over/under valuation of currency.
In the light of the above given statements, choose the correct option from the following:

Answer 1

Step 1: Calculate Gross Value Added (GVA) of Firm Y.
$GVA_{Y} = \text{Value of Output of Y} - \text{Intermediate Consumption of Y}$
Intermediate Consumption of Y = Purchases made by Y from X = ₹ 300 crore.
$GVA_{Y} = 1,400 - 300 = ₹ 1,100 \text{ crore.}$
Step 2: Find the Value of Output for Firm X.
Given that $GVA_{X} = GVA_{Y}$, we have $GVA_{X} = ₹ 1,100$ crore.
$GVA_{X} = \text{Value of Output of X} - \text{Intermediate Consumption of X}$
Intermediate Consumption of X = Purchases made by X from Y = ₹ 400 crore.
$1,100 = \text{Value of Output of X} - 400$
$\text{Value of Output of X} = 1,100 + 400 = ₹ 1,500 \text{ crore.}$
Step 3: Determine Domestic Sales of Firm X.
$\text{Value of Output of X} = \text{Total Sales} + \text{Addition to Stock}$
$1,500 = \text{Total Sales} + 100 \implies \text{Total Sales} = ₹ 1,400 \text{ crore.}$
$\text{Total Sales} = \text{Domestic Sales} + \text{Exports}$
$1,400 = \text{Domestic Sales} + 200 \implies \text{Domestic Sales} = ₹ 1,200 \text{ crore.}$

For a hypothetical economy, assuming there are only two firms (X and Y) with equal values of Gross Value Added (GVA). On the basis of the following data, estimate the values of Domestic Sales by firm X:

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