Answer to Question #75103 in Macroeconomics for Dani
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 3 000 $ and to the carmaker for 4 000 $. The machine manufacturer sells its products to the producers of: cars (for 4 000 $), tires (for 2 000 $) and glass (for 500$). To produce cars, apart from steel, the producer of cars buys: tires (1 500$), glass (1000$). It sells the cars to the car dealers for 11 000 $. The tire manufacturer buys gum for 1000 $. Car dealer sells the cars to consumers for 15 000$. 1. Calculate GDP using the final expenditure approach (1 point) 2. What is the total value of production? Use a value-added approach to work out the answer. Explain the concept of value added? (1,5 points)
1.In this situation GDP=C(consumer spending)=15000 2)3000+1000+4000+2000+500+(11000-(3000+1000+4000+2000+500))+1000+(15000-(3000+1000+4000+2000+500+(11000-(3000+1000+4000+2000+500)+1000))=15000 Total value added is equivalent to revenue less intermediate consumption.