In a given year, the following activities occur: A steel company produces steel

Question

In a given year, the following activities occur:

A steel company produces steel which was then sold to a car company for 40,000. The steel company pays its workers 20,000.

The car company pays 40,000 to the steel company to buy the steel and pays its workers 40,000 to make the cars, which were then sold to consumers for 120,000.

a. Using the productin gof final goods approach, how much is the GDP in this economy?

b. How much is the value added at each stage of production? Using the value added approach, how much is the GDP?

c. What are the total wages and profits earned? use the income approach to compute the GDP.

Explanation / Answer

a) gdp= 120000-40000-40000

40000

b) value added at each stage is 20000 and 20000

gdp=40000

c)

=40000

b)

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