Question

Assume that a tire company sells four tires to an automobile company for $400, another company sells a compact disc player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that should be counted in GDP is:

Answer 1

Answer:

$20,000

Explanation:

Gross domestic product is the sum of final goods and services produced in an economy within a given period which is usually a year.

GDP calculated using the expenditure approach = Consumption spending + Investment spending by businesses + Government Spending + Net Export

Only final goods are included in the calculation of GDP.

The tires and compact are intermediate goods and would not be included in GDP. If they are included it would be regarded as double counting