Question #132807
Suppose that in Year 1 a firm produces 5 cars valued at $10,000 each. It has contributed $50,000
to GDP. In Year 2 its contribution is $60,000. Has the firm produced more cars? Why eliminating price
changes allows us to see more clearly whether or not there have been output changes.
to GDP. In Year 2 its contribution is $60,000. Has the firm produced more cars? Why eliminating price
changes allows us to see more clearly whether or not there have been output changes.
Expert's answer
Year 1 Nominal GDP=(5*$10000)=$50000
year 2 Nominal GDP= $60000
The difference between yr 1 and 2=$60000-$50000=$10000
GDP(Gross Domestic Product) is the monetary value of final goods of a country .
The increased contribution could be determined with other factors such fiscal government policies on raw materials and final goods,Change of monetary terms like inflation,further increased demand for cars increasing profit margin and tax payments and GDP
GDP= C + I+G+ (x-M)
where C = consumption
I =National income
G=government expenditures
x=export
M=imports
