Question

An economy produces only 500,000 tables valued at $100 each. Of these, 100,000 are sold to consumers, 200,000 are sold to businesses, 100,000 are sold to the government, and 50,000 are sold abroad. No tables are imported. At the end of the year, the table manufacturers hold the unsold tables in inventory. What is the value of GDP?A. $5 millionB. $40 millionC. $45 millionD. $50 million

Answer 1

Answer:$ 50 million

Explanation:

We know GDP is calculated as the sum of consumption spending(C),Investment spending(I),Government spending(G) and net export(X).

Here

• Consumption spending$=100,000\times 100=\ 10 million$
• investment spending$=200,000\times 100=\ 20 million$
• Government spending$=100,000\times 100=\ 10 million$
• $5 million worth tables are sold abroad
• no tables are imported.

At the end of year

GDP=C+I+G+X-M

GDP=10+20+10+5-0=$45 million

and the remaining 50,000 table worth of $5 million in inventory goes to the investment made by private sector

thus value of GDP is $ 50 million.