Answered: 7) Assume that a tire company sells 4…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter19: The Macroeconomic Perspective

Section: Chapter Questions

Problem 2SCQ: Which of the following are included in GDP, and which are not? The cost of hospital stays The rise...

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7) Assume that a tire company sells 4 tires to an automobile company for $400, another
company sells a compact disc player for $500, and the automobile company puts all of these
items in or on a car that it sells for $20,000. In this case, how much GDP has been generated?
a. $20,000.
b. $20,000 less the automobile company’s profit on the car.
c. $20,900.
d. $20,900 less the profits of all three companies on the items that they sold.

Expert Solution

Step 1

We compute the GDP by getting the total market value of every final great and services produced in a specific period inside the lines of an economy. Note that the market value of intermediate goods and services is excluded from the total national output estimation.

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