Save U More, a grocery in Iowa, purchased 2000 lbs. apples from an Iowan farmer

Question

Save U More, a grocery in Iowa, purchased 2000 lbs. apples from an Iowan farmer at $0.4 per pound. The grocery store sold 1500 lbs. of the apples as fresh apples at $0.9 per lb., used the rest (500 lbs.) to make 200 gallons of apple cider, and sold the apple cider at $3 per gallon. If 60% of the ownership and workers of Save U More were Canadian citizens and the other 40% were U.S. citizens, what would be the contribution to U.S. GNP, U.S. GDP, Canadian GNP, and Canadian GDP from the above activities?

Explanation / Answer

GDP takes into account aonly the final goods: Save U more: used 1500 lbs for sale as fresh apples Used 500 lbs for producing 400 gallons of cidar. So final output are 1500 lbs fresh apples and 400 gallons of cidar. Final output =  1500 x $0.9 + 400 x $3                     = $1350 +$1200                     = $ 2550 Since Lowa is in US: GDP contribution of Save U more to US is $2550 GDP contribution of Save U more to Canada is $0 GDP is the total output produced within a countries border, this can be from a domestic producer or forigen producer. GNP: Is the total income or out put by a nation. it is given by GNP= GDP - Net receipts. net receipts: are the net of incomes received by investing in a forigen country minus the income going out of the country which is invested by the forigen companies. In the above example 60% of income belongs to Canadians and 40% of income belongs to US citizens. Gross national income of US can be caliculed by deducting this 60% from GDP. 60% of 2550= 60/100 x $2550                      = $1530 This 60% will go out of the country to Canada, so it should be deducted to know the actual income of US. GNP of US= GDP US - $1530                   Save u more contributes only 40% of income to GNP which is already taken into account in the GDP figure So, it contributs - $1530 to US GNP, which is net out flow. Where as it contributes $2550 to US GDP. Save u More contribution to canada: For Canadian GDP save U more contribution is $0, as the income is generated in US. contribution to GNP is 60% of $2550 income earned by the Canadians                                   = $1530 Canadian GNP= GDP cnada+ $1530 GNP contribution to canada= $1530 GDP contribution to Canada= $0

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