Calculate GDP for this economy by each of the expenditure

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Reference no: EM131084762

During the current year ABC computer company makes $1M worth of computer com- ponents. Their labor costs are $500k and they pay $100k in indirect taxes. ABC sells all of the output to XYZ who incorporate the components into 50 computers. Assembly of each computer requires $10k of labor. They also pay $1k in interest per computer on loans that they took out to O¨nance the construction of the computers. They market the computers for $40k each. By the end of the year only 35 of the computers have been sold. The unsold computers are held on their books as inventory at $31k each.

(a) Calculate GDP for this economy by each of the expenditure, product (i.e. value added) and income approaches (show how each number is obtained).

(b) Now suppose instead that ABC produces $2M of components half of which are sold directly to consumers. Their labor costs and indirect taxes both double. The remaining components are sold to XYZ as before and there is no change to what XYZ does. Recalculate GDP by each of the approaches.

Reference no: EM131084762

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