In 2009, Corny Company grows and sells $2 million worth of corn to Tasty Cereal Company, which makes corn flakes. Tasty Cereal Company produces $6 million worth of corn flakes in 2009, with sales to households during the year of $4.5 million. The unsold $1.5 million worth of corn flakes remains in Tasty Cereal Company's inventory at the end of 2009. The transactions just described contribute how much to GDP for 2009?

Question

Quizplus · Accepted Answer

GDP is calculated based on the value of final goods and services produced. The $6 million worth of corn flakes produced by Tasty Cereal Company includes both the $4.5 million sold to households and the $1.5 million added to inventory, which counts as investment. The $2 million worth of corn sold to Tasty Cereal Company is an intermediate good and is not counted separately in GDP.

In 2009, Corny Company Grows and Sells $2 Million Worth