Suppose that the following table represents the goods and services produced in a
ID: 1131861 • Letter: S
Question
Suppose that the following table represents the goods and services produced in a very simple closed economy in 2016. Using the information in the table below, answer question 2.
Product
Quantity
Price
Steel
1000
$100
iPods
5000
$300
Cars
500
$25 000
Legal Services
100
$2000
Question 2. Assume that steel is used as an input in the production of cars. Using that information, calculate the GDP for the year 2016. Explain your answer in words and show all calculations. – Approx. number of words: 120 plus calculations.
Product
Quantity
Price
Steel
1000
$100
iPods
5000
$300
Cars
500
$25 000
Legal Services
100
$2000
Explanation / Answer
The GDp includes all the final goods and services produced within the geographical boundaries of a nation. Thus the production of steel, which is an intermediate good and value of which is included in value of cars, is excluded from GDP for 2016. This is done to avoid double counting of intermediate goods in calculation of GDP.
Product Quantity Price P*Q(product of quantity & price) Steel(Excluded) 1000 100 100000 iPods 5000 200 1000000 Cars 500 25000 12500000 Legal Services 100 2000 200000 GDP 13700000Related Questions
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