Answer to Question #132807 in Macroeconomics for Faheem ali Mirani

Question

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.

Answer 1

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