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.
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.
Chapter6: Tracking The U.s. Economy
Section: Chapter Questions
Problem 1.2P
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Question
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
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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