Question

The island of Utopia is a small closed economy. The country has one factory that produces 100 cars called the meteor yearly. Each meteor sells for $10,000. The factory buys $100,000 in raw steel, $40,000 in tires and $60,000 in miscellaneous parts for the production of this 100 cars. There is also a firm on the island which provides accounting service for the factory. It charges the factory $1,000 per month for the service. Assuming all production and service work is done in one year. What is the GDP for Utopia?

Answer 1

Answer : GDP is the sum of money value for all finished or final goods and services in a certain time period.

According to the given information, time period is 1 year. The final good is car which is called meteor. In the given time period the factory produce 100 cars and the money value of each car is $10000. The total money value for 100 cars = 100 × 10000 = $1000000

The money value for 1 year(12 months) of accounting service = 12 × 1000 = $12000

The GDP of Utopia = 1000000 + 12000 = $1012000