Question

• In a model economy scenario, General Motors produced 1000 cars at $25,000 each in USA in 4^th quarter of 2018.

600 cars were sold in the USA @ $25,000 per car.

400 cars were exported @ $25,000 per car. .

Calculate the contribution of General Motors in the 4^th quarter of 2018 to US GDP accounts. Use both Value Added and Expenditure method. Resolve if there is any discrepancy. (SHOW ALL THE STEPS AND WRITE THE RELEVANT UNITS)

Answer 1

Value Added Method.

Total cars produced by General Motors =1000 cars

Value per unit =$25000

Value of Gross output (GDP) Total Product x Market Price =1000 x 25000 =$25000000.

Expenditure Method.

Private Consumption Expenditure = Total product x market price =600 x 25000 =$15000000.

Value of Net Export =Total product exported x Market price =400 x 25000=$100,00000

GDP =Private Consumption Expenditure+Value of Net Exports =15,000000+10,000000=$25,000000.

No discrepancy.