Question

Suppose a gold miner finds a gold nugget and sells the nugget to a mining company for $600. The mining company melts down the gold, purifies it, and sells it to a jewelry maker for $1200. The jewelry maker fashions the gold into a necklace that it sells to a department store for $1800. Finally, the department store sells the necklace to a customer for $2400.

Answer 1

Answer: GDP rises by $2,400

Explanation: GDP refers to the market value of all final goods and services produced within the domestic territory of a country during a given period of time. It can be calculated using the value added method, expenditure method or the income method.

Value added method-

$GDP = Value added by the Gold miner +  Mining company + Jeweler + Departmental store$

$= 600 + 600 + 600 + 600$

$= 2,400$

Expenditure method

$GDP= Value of the final necklace purchased by the customer$

$= 2400$

Therefore, GDP rises by $2,400.