Question

The expenditure and resource cost-income approaches to calculating GDP arrive at the same final number, but they calculate that number in different ways. To illustrate, consider the possible effects of the following transactions on GDP:
1. Ralph pays The Home Station $1,200 to plant a new lawn in his backyard. He's attracted by The Home Station's guarantee that he'll be happy with the new lawn, or he'll get his money back.
2. The Home Station pays Al's Lawn Care $850 to plant the lawn.
3. Al's Lawn Care buys grass seed worth $200 from Green Center Nursery.
Compute contributions to GDP, using the expenditure approach. Assume that Green Center Nursery receives the grass seed at no charge and that other costs are zero.
Which of the following would be included in the expenditure method of calculating GDP? Check all that apply.
a. The Home Station spends $850.
b. Ralph spends $1,200.
c. Al's Lawn Care spends $200.
The total contribution to GDP, measured by the expenditure method, is $______

Answer 1

Answer:

Which of the following would be included in the expenditure method of calculating GDP? Check all that apply.

• B) Ralph spends $1,200.

The total contribution to GDP, measured by the expenditure method, is

• $1,200

Explanation:

The expenditure approach always incorporates the final consumption of a product or service. In this case, the only addition to the GDP will be Ralph spending $1,200 on his new lawn.

On the other hand, the cost income approach adds production stages, but the result is the same:

Stage of            Sales value          Cost of intermediate          Resource            production                                      goods                                 cost-income

Green Center        $200             $0                          $200-$0=$200  Nursery

Al's Lawn Care      $850                   $200                        $850-$200=$650

The Home             $1,200            $850                         $1,200-$850=$350 station                                                                                                                  

total                                                                                                      $1,200

Answer 2

The one that would be involved in the expenditure method of estimating GDP would be:

B). Ralph spends $1,200.

• "Expenditure method" of estimating GDP is described as the method that attempts to calculate the amount of money that has been spent by the people in purchasing the various goods, as well as, services.
• In the given situation, the money that is spent by Ralph on the consumption of various goods, as well as, services would be as follows:
• Final cost = Sales value - Cost of intermediate goods

Final Cost of Green Center        

$=$ $$200 +$ $$0$                        

= $200

Final Cost of Al's Lawn Care      

= $850                  

= $850-$200

= $650

Final Cost of The Home Station    

= $1,200            

= $1,200-$850

= $350 station  

Total cost = $200 + $650 + $350

= $1,200                            

Learn more about "GDP" here:

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