Question

An automobile factory in Michigan uses $100,000 worth of parts purchased from foreign countries along with U.S. inputs to produce 30 cars worth $20,000 each. Twenty of these cars are sold and 10 are left in inventory. How much did these actions add to GDP?

Answer 1

Answer:

Total value added to the GDP is $500,000.

Explanation:

Given that,

Automobile factory uses parts that are purchased from foreign countries = $100,000

Total cars produce = 30

Price of each car = $20,000

Total cars sold = 20

Left in inventory = 10

Therefore,

Addition to GDP:

= Total value of car produced - Imports(parts purchased from foreign countries)

= (Selling price of each car × Total cars produced) - $100,000

= ($20,000 × 30) - $100,000

= $600,000 - $100,000

= $500,000

Hence, total value added to the GDP is $500,000.