An economy produces only 1,000,000 computers valued at $2,000 each. Of these, 200,000 are sold to consumers, 300,000 are sold to businesses, 300,000 are sold to the government, and 100,000 are sold abroad. No computers are imported. The unsold computers at the end of the year are held in inventory by the computer manufacturers. What is the value of GDP?

Question

Quizplus · Accepted Answer

GDP (Gross Domestic Product) is the total value of goods and services produced within a country's borders in a given period. In this case, the economy has produced 1,000,000 computers valued at $2,000, which gives a total production value of $2,000,000,000 (2 billion dollars). To calculate GDP, we need to consider only the final sales of goods and services to avoid double-counting. Therefore, the value of GDP is the sum of all final sales: 200,000 x $2,000 (sold to consumers) + 300,000 x $2,000 (sold to businesses) + 300,000 x $2,000 (sold to the government) + 100,000 x $2,000 (sold abroad) = $1,800,000,000 or $1.8 billion. The unsold computers held in inventory at the end of the year do not count towards GDP since they have not been sold yet.

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