Question

A steel company sells some steel to a bicycle company for $150. produce a bicycle, which it sells for $250. Taken together, these two transactions contribute.

a. $150 to GDP.

b. $250 to GDP

c. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.

d. $400 to GDP .

Answer 1

Answer:

The correct answer is option (B).

Explanation:

According to the scenario, the given data are as follows:

Amount to produce bicycle = $150

Bicycle sells price = $250

So, Value added = Bicycle sells price - Amount to produce bicycle

= $250 - $150

= $100

So, we can calculate increase in GDP by the following method:

Contribution to GDP = Value added + Amount to produce bicycle

= $100 + $150

= $250

Hence, the contribution to GDP is $250.