Question

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is:_______.
A. $1200.
B. $500.
C. S2300.
D. $1100.

Answer 1

Answer: A. $1200

Explanation:

The Gross Domestic Product of a nation is the dollar value of all FINAL goods produced within the borders of the said nation during a specific period of time, usually a year.

Final is highlighted because INTERMEDIATE goods are not included because if they were, the GDP would be OVERSTATED as there would be Double Counting of goods and services.

$1200 was the final price in the chain and will be counted in GDP as it encompasses all the processes the cloth went through.