Question

Suppose Nucor Steel sells $2,000 worth of steel to Ford, other producers sell $5,000 worth of other inputs to Ford; Ford then uses the steel and other inputs to make a Taurus which it sells to the car dealership for $15,000. The car dealership sells the car to a school teacher for $18,000. What is the total contribution to GDP made by this entire series of transactions?

Select one:

a. $22,000

b. $40,000

c. $7,000

d. $18,000  

e. $15,000

Answer 1

Ford is getting inputs from Nucor steel and other producers worth of $7000 ie $2000+$5000

Ford then uses the steel and other inputs to make a Taurus which it sells to the car dealership for $15,000 which is furthur sold at a value of $18000 to a school teacher.

The contribution to GDP should be the final value of goods and services as per the definition of GDP. Here the final value is $18000 . All the values before it were intermediate values. Going by the definition of GDP , we would consider the contribution of car to GDP as $18000.

Answer is option D)$18000

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