Question

If an automobile manufacturer pays $200 for a car windshield, $400 for four car tires, $100 for a car CD player, and sells cars made with these parts for $20,000, then each car the automobile manufacturer sells contributes how much to GDP?

Answer 1

Answer:

$20,000

Explanation:

GDP is the market value of all final goods and

services produced within a country in a given period of time.

The GDP includes only the value of final goods, the value of manufactured automobile in this question, not the value of intermediate goods used in it, the windshield, tires, and others.

Reason: The price of intermediate goods (windshield, tires, CD player) is already included in the final price of $20,000.

Hence, GDP discourage to include these intermediate goods value as it will lead to double counting given that they're already included in final price of $20,000.