An economy produces 1,000,000 computers valued at $2,000 each. Households purchase 200,000 computers, of which 100,000 are imported. Businesses purchase 300,000 domestically produced computers, the government purchases 300,000 domestically produced computers, and 100,000 domestically produced computers are sold abroad. At the end of the year, the computer manufacturers hold the unsold computers in inventory. What is the value of GDP?

Question

Quizplus · Accepted Answer

In this problem imports equal exports, or net exports equals zero, so all domestically produced computers are either sold domestically or added to inventory. Thus, GDP is 1,000,000 computers times $2,000 each or $2.0 billion.

An Economy Produces 1,000,000 Computers Valued at $2,000 Each