A firm purchases $600,000 worth of raw materials and pays wages and salaries of $100,000 and dividends of $200,000. If the firm sells its output for $1 million, the firm's value added to GDP is

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Quizplus · Accepted Answer

Value added to GDP is calculated by subtracting the cost of inputs used (raw materials, wages, salaries, and dividends) from the value of the firm's output. Therefore, value added to GDP = $1 million - ($600,000 + $100,000 + $200,000) = $100,000.

A Firm Purchases $600,000 Worth of Raw Materials and Pays