Suppose we have the following information about a plumber: wages $30,000,repair sales $200,000,taxes $5,000,loan interest $15,000,plumbing materials $20,000. What is the contribution to GDP of this plumber using the product approach?
A) $200,000.
B) $180,000.
C) $50,000.
D) $30,000.

Question

Quizplus · Accepted Answer

The contribution to GDP using the product approach is calculated as follows:
GDP = C + I + G + (X-M)
where,
C = Consumption, 
I = Investment, 
G = Government Spending, 
X = Exports,
M = Imports

Here, we can assume that the plumber's services are consumed by households (C) or businesses (I). Let's assume it's consumed by households, so the $200,000 repair sales is counted as Consumption (C).

Therefore, GDP = $200,000 (C) + ($30,000 wages - $5,000 taxes + $15,000 loan interest + $20,000 plumbing materials) = $180,000.

Hence, the best choice is B) $180,000.

Suppose We Have the Following Information About a Plumber: Wages