Transactions using the expenditure approach

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Palpatine Computing has a factory in the country of Exegol worth $20 million. During the current year, Palpatine Computing builds $3 million worth of computer components. Palpatine's costs are: labor $1 million, interest on debt $0.5 million, and taxes $0.3 million.

Palpatine Computing sells all its output to First-Order Supercomputer. Using Palpatine's components, First-Order builds four supercomputers at a cost of $1.25 million each ($0.75 million worth of components, $0.4 million in labor costs, and $0.1 in taxes per computer). First-Order has a $30 million factory in Exegol.

First-Order sells three of the supercomputers for $1.5 million each to the government of Exegol. At year's end, it had not sold the fourth. The unsold computer is carried on FirstOrder's books as an $1.25 million increase in inventory.

Calculate the contributions to Exegol's GDP of current year transactions using the expenditure approach. Detail which components of GDP are affected and the final impact on GDP. Remember to carefully explain your answer (numbers thrown together without explanation does not count as a correct answer).

Reference no: EM132473362

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