Exam 1: Part B. Essay Questions each worth 10 points. 1. The table below shows a

Question

Exam 1: Part B. Essay Questions each worth 10 points. 1. The table below shows a series of market transactions in the life of an automobile. Time Frame Transaction Parts sold to car maker Factory labor leads to assembled car Dealer buys car Dealer sells car to customer Cost $13,000 in parts $11,000 in labor Fall 2017 Winter 2017 Spring 2018 $28,000 for the car Summer 2018 $33,000 for the car Using the given data describe two different ways that these transactions could contribute to gross domestic product (GDP) for the years 2017 and 2018. Identify which way is used irn practice and the reasons for doing so?

Explanation / Answer

Total GDP is :$11000 in the year 2017

and $33000 in the year 2018.

Intermediate goods are not a part of GDP hence parts sold to car maker is not a part of GDP. Also only final consumption goods are calculated and hence only when dealer sells car to customer. Wages paid is a part of consumption.

Only final goods are calculated to avid double counting.

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