Calculating GDP in the Shirt Economy using the Expenditure Approach
In the simplified shirt economy, the Gross Domestic Product (GDP) as measured by the expenditure approach is $100. This calculation is based on the value of the final sale to the consumer, which is the finished shirt, and ignores the intermediate transactions of cotton ($50) and cloth ($80).
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Introduction to Macroeconomics Course
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Calculating GDP in the Shirt Economy using the Expenditure Approach
Calculating GDP in the Shirt Economy using the Value Added Approach
In a simple economy, a farmer sells wheat to a miller for $20. The miller grinds the wheat into flour and sells it to a baker for $35. The baker uses the flour to make bread, which is then sold to a consumer for $50. Based on this information, what is the total value contributed to the economy by this entire production process?
Analyzing Value Added in a Production Chain
In a simplified economy, a cotton farmer sells raw cotton to a textile mill for $50. The mill processes the cotton into cloth and sells it to a shirt factory for $80. The factory then manufactures a shirt and sells it to a final consumer for $100. Match each production stage with the value it added to the economy.
Identifying Errors in Economic Calculation
Decomposition of GDP by Expenditure
In a simple economy, a farmer sells wheat to a miller for $50. The miller grinds the wheat into flour and sells it to a baker for $80. The baker then uses the flour to bake bread, which is sold to a consumer for $120. Based on these transactions, what is the contribution to the economy's total output as measured by the total spending on final goods and services?
Calculating Contribution to Total Output
Analyzing Transactions for Total Output Measurement
To accurately measure a country's total output for a specific year using the spending method, one must sum the total value of all market transactions that occurred, including the sale of newly manufactured cars, the resale of vintage cars from a previous era, and the purchase of corporate stocks.
For each economic transaction listed, determine how it would be treated when measuring a country's total output by summing the total spending on all final goods and services for a given period.
Identifying Errors in GDP Calculation
Evaluating Economic Output Calculations
Critique of the Spending-Based Output Measurement
To measure a country's total output for a specific year, an economist sums the total market value of all spending on final goods and services produced within that country. From the list below, which transaction would be included in this calculation?
In a given year, an economy has the following transactions: A car manufacturer produces 100 cars valued at $20,000 each and sells 90 of them to households. A local bakery produces and sells $50,000 worth of bread to consumers. A used car dealership sells a vintage car for $15,000. Using the method that measures an economy's total output by summing all spending on final goods and services, what is the total contribution of these transactions to the economy's output for the year?
Calculating GDP in the Shirt Economy using the Expenditure Approach
Learn After
In a simple economy, a farmer sells wheat to a miller for $20. The miller grinds the wheat into flour and sells it to a baker for $35. The baker uses the flour to make bread and sells it to a grocery store for $60. Finally, the grocery store sells the bread to a customer for $75. Based on these transactions, what is the total contribution to this economy's gross domestic product (GDP)?
Identifying Errors in GDP Calculation
GDP Calculation for a New Car
An economy consists of three companies. Company A harvests raw lumber and sells it to Company B for $2,000. Company B uses the lumber to manufacture furniture, which it sells to Company C, a retailer, for $5,000. Company C then sells the furniture to a final consumer for $8,000. Based on these transactions, the total value added to the economy's gross domestic product (GDP) is $____.