08 Jun Question Calculating GDP using the Expenditure, Inc
Question
Calculating GDP using the Expenditure, Income, and Product (Value-Added) Approaches
3. (Based on a problem in Abel, Bernanke, and Croushore, Macroeconomics, 8th Edition, Pearson, 2014.)
ABC Steel produces $10,000,000 worth of steel within the US during the current year. ABC’s
costs are labor, $5,000,000; interest on debt, $300,000; and taxes, $500,000.
ABC Steel sells all $10,000,000 worth of steel to a US automotive company XYZ Automotive. XYZ
automotive builds a total of 1250 cars at a cost of $13,000 each ($8000 worth of steel; $3000 in labor
costs; and $2000 in taxes per car produced). It sells 800 cars to domestic consumers and 200 cars to
foreign consumers at a price of $20,000 each. The other 250 cars remain unsold at the years end, being
calculated as $3,250,000 increase in inventory for XYZ Automotive.
a) Calculate the contributions to GDP of these transactions using the:
(i) Expenditure Approach
(ii) Income Approach
(iii) Product (Value-Added) Approach
Correct use of each of the three approaches will lead to the same answer.
b) Repeat part (a), but now assume that XYZ required an extra $2000 worth of steel, which it purchased
from a foreign company, in order to produce each car. (Hint: Among other things, the value of
inventory investment will change since the cost of producing each car has changed to $15,000.)
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.