Suppose that Firestone Tires buys raw rubber for $5,000 and then uses this to make tires it sells for $20,000.As a result,GDP has risen by:
A)$20,000
B)$5,000
C)$15,000
D)$25,000

Question

Quizplus · Accepted Answer

GDP increases by the final value of goods and services produced, which in this case is the $20,000 worth of tires sold by Firestone. The purchase of raw rubber is an intermediate transaction and does not directly add to GDP.

Suppose That Firestone Tires Buys Raw Rubber for $5,000 and Then