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Chapter 7: Q10. (page 152)

Suppose GDP is \(5.0 trillion, depreciation is \)1 trillion, and gross output (GO) is $17.25 trillion.

a. What is the value of all stages of production and distribution except for final sales of goods and services?

b. What is the dollar value of the economic activity taking place at every stage of production and distribution?

Short Answer

Expert verified

  1. $12.5 trillion

  2. $17.5 trillion

Step by step solution

01

Explanation for part (a)

The value of all stages of production and distribution except for final sales of goods and services is the difference between the gross output and GDP. The gross output is the sum of the total value of the sales at each stage of production and distribution.

Total value of all stages except final sales = GO - GDP

= $17.5 trillion - $5 trillion

= $12.5 trillion

02

Explanation for part (b)

The dollar value of economic activities at every stage of production and distribution of a good or service is given by the Gross output (GO) and hence is equal to $17.5 trillion.

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Most popular questions from this chapter

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

The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data.

Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and income approaches. The results you obtain with the different methods should be the same.

  1. Using the above data, determine GDP by both the expenditures approach and the income approach. Then determine NDP.

  2. Now determine NI in two ways: first, by making the required additions or subtractions from NDP; and second, by adding up the types of income and taxes that makeup NI.

  3. Adjust NI (from part b) as required to obtain PI.

  4. Adjust PI (from part c) as required to obtain DI.

Why do economists include only final goods and services when measuring GDP? Why don鈥檛 they include the value of the stocks and bonds bought and sold? Why don鈥檛 they include the value of the used furniture bought and sold?

Tina walks into Ted鈥檚 sporting goods store and buys a punching bag for \(100. That \)100 payment counts as ______________ for Tina and _____________ for Ted.

a. income; expenditure

b. value added; multiple counting

c. expenditure; income

d. rents; profits
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