Question

Country T produces 1,200 tires at a cost of $4 each, and sells all 1,200 tires to Country B at a price of $5 each. Country F produces 600 bicycle frames at a cost of $120 each, and sells all 600 frames to Country B for $150 each. Country B produces 600 bicycles at a cost of $300 each. Country B sells 580 bicycles to consumers for $350 each. They do not sell the remaining bicycles.

In this simple example:

GDP in Country T is $     

GDP in Country F is $

GDP in Country B is $

Answer 1

Country T exports 1200 tires at a final price of $5 each. Hence, GDP = 1200 x 5 = $6,000.

Country F exports 600 bicycle frames at a final price of $150 each. Hence, GDP of country F = 600 x 150 = $90,000.

Country B imports the intermediate goods of amount $6,000 + $90,000 = $96,000 from country T and F. Out of 600 bicycles, 580 are sold at a price of $350. Hence, consumption expenditure = 580 x $350 = $2,03,000. Rest 20 bicycles are added as new inventory. Hence, they will be added to country's GDP at current price. Hence, addition to inventory = 20 * $350 = $7,000. Now the final value of the cycles at current price is $2,03,000 + $7,000 = 2,10,000. On the other hand, the import amount of $96,000 would be deducted. Hence, GDP of country B = $2,10,000 - $96,000 = $1,14,000.

GDP in Country T is $ 6,000

GDP in Country F is $ 90,000

GDP in Country B is $ 1,14,000