Answer to Question #86524 in Macroeconomics for Marouane Zaiz

Question

There are seven producers in a small closed economy: producers of steel, machinery, rubber, tires, glass and cars and car dealers. Manufacturer of steel sells the steel to the producer of machines for 2 000 $ and to the carmaker for 3 000 $. The machine manufacturer sells its products to the producers of: cars (for 4 000 $), tires (for 2 000 $) and glass (for 1 000$). To produce cars, apart from steel, the producer of cars buys: tires (2 000$), glass (1 000$). It sells the cars to the car dealers for 12 000 $. The tire manufacturer buys gum for 1000 $. Car dealer sells the cars to consumers for 16 000$.

Answer 1

If car dealer sells the cars to consumers for 16 000$, then the GDP of this economy increases by $16 000, because the price of the final goods only is counted.