Question

Assume that a grower of flower bulbs sells the annual output of bulbs to an Internet retailer for $70,000. The retailer in turn brings in 160,000 from selling the bulb directly to final customers. what amount would these two transactions add to personal consumption expenditures and thus to GDP during the year?

Answer 1

Ans:

GDP is the market value of final goods and services produced in a country during a period.

The amount added to personal consumption expenditure and GDP during the year are as follows

The grower of flower bulbs would add $70,000 to the GDP.

The retailer would add the difference between the $70,000 wholesale price and the $160,000 price to the end consumer,which is $90,000.

Sum of these amounts equals the $160,000 which is the price paid by final consumers.