Suppose we have the following information about a furniture maker: furniture sales $100M,wood purchases $60M,wages $25M,tax on profits $5M,profits $10M. What is the contribution to GDP of this company using the product approach?
A) $100M.
B) $60M.
C) $40M.
D) $15M.

Question

Quizplus · Accepted Answer

The contribution to GDP using the product approach is equal to the total value of goods and services produced by a company. This is calculated as the sum of the value of intermediate goods (wood purchases) and final goods (furniture sales) minus any subsidies received and adding any taxes paid on production. In this case, the contribution to GDP would be $100M (furniture sales) + $60M (wood purchases) - $0 (no subsidies) + $5M (tax on profits) = $165M. However, we need to subtract wages paid to employees as these are already included in the consumption component of GDP. Therefore, the final answer is $165M - $25M (wages) = $40M, which is option C.

Suppose We Have the Following Information About a Furniture Maker