1) A manufacturer purchased $4,000 worth of ingredients and produced 2000 units
ID: 1113252 • Letter: 1
Question
1) A manufacturer purchased $4,000 worth of ingredients and produced 2000 units of output. All units were sold for $10 each to a local wholesale. The wholesale sold the items to customers for $45 each. Calculate the value added for the manufacturer and the wholesaler.
Choose the correct answer for the Manufacturer and wholesaler from the values below.
A)$90,000 B)$16,000 C)$4,000 D)$70,000 E)$20,000
2) Below is some data of a fictitious country Petersville. Calculate Petersville GDP.
o Consumption expenditure - 1000
o Exports -125
o Government purchases of goods and services – 300
o Construction of new homes and apartments -125
o Sales of existing homes and apartments – 320
o Imports – 90
o Beginning of the year inventory stocks – 140
o End of year inventory stocks -160
o Business fixed investments – 250
o Government payments to retirees -160
o Household purchases of durable goods – 265
3) Distinguish between a country’s gross domestic product and gross national product.
Choose best answers for GNP and GDP from answers given below.
o By citizens abroad
o Inside country by foreigners
o Inside country by citizens
o By citizens at home or abroad
o Inside country by foreigners or citizens
o By citizens at home
4) For each of the following, say whether they are included or not included in gross domestic product.
The sale of a current year model used. (Included or Not included)
The service of a licensed manicurist given in the current year. (Included or Not included)
The profits of a foreign owned corporation operating in the domestic economy. (Included or Not included)
The work done in other countries by the normal residents of a country. (Included or Not included)
The cooking of meals for the home consumption. (Included or Not included)
Explanation / Answer
Ans:
1) Computation of value added for the manufacturer and the whole saler
value added for the manufacturer = (2000 * $10) - $4000
= $20000 - $4000
= $16000
value added for the wholesaler = (2000 * $45) - $16000 - $4000
= $90,000 - $16000 - $4000
= $70,000
2)
Gross Domestic Product(GDP) is the total market value of all final goods and services produced in a country within a given period. Hence sale of existing homes and apartments are not included in the GDP.
GDP = Consumption + Investment + Government + (Exports - Imports)
GDP excludes nonproduction transactions: public transfer payments, such as Government payments to retirees .
Consumption = $1000 + $265
Investment = $125 + $250 + ($160-$140)
= $395
Government = $300
Exports - Imports = $125 - $90
= $35
3) By citizens abroad
Gross national product is the total value of all goods and services produced by a country regardless of production location. GNP = GDP plus net factor income from abroad. Hence citizens abroad will distinguish between GDP and GNP.
4)
a) The sale of a current year model used - Not Included
b) The service of a licensed manicurist given in the current year - Included
c) The profits of a foreign owned corporation operating in the domestic economy - Included
d) The work done in other countries by the normal residents of a country - Not Included
e) The cooking of meals for the home consumption - Not Included
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