Question

The Bigdrill company drills for oil, which it sells for $200 million to the Bigoil company to be made into gas. The Bigoil company's gas is sold for a total of $600 million. What is the total contribution to the country's GDP from companies Bigdrill and Bigoil? $400 million $600 million $200 million $800 million

Answer 1

Answer:

$800 million

Explanation:

GDP is the sum of the values of all goods and services produced by an economy in a given period. The calculation of GDP is through the final value of each product, ie, it is not considered the added value of the inputs.  In calculating GDP only the final products of each firm are considered and not the inputs. For example, if a bakery sells bread, bread is counted in the bakery's contribution to GDP, but not flour and other ingredients. These ingredients are accounted for GDP by the producers of these ingredients. The same case applies in oil production. Bigdrill produces $ 200 million in oil and that is its contribution to GDP. Bigoil uses Bigdrill's oil input for gas production, which is its final product for $ 600 million. So Bigoil's contribution is $ 600 million. The sector's total contribution to GDP is the sum of each company's contribution, which gives $ 800 million.