Question

Suppose there are three factories in Macroland and the following occurred in 2019: Metal, plastic and a car factory. Metal factory produces $200, plastic factory produces $500, and car factory produces $700, of its respective products. The metal factory sells all of its output to the car factory. The plastic factory sells $80 worth of plastic to the car factory, $20 to the government, and the rest to consumers. The Car factory exports $50 of its cars and sells the rest to consumers. What is the GDP of Macroland in 2019?

Answer 1

The Metal Factory produces and sells it's entire produce to the car factory. So it is an input to the Car. The addition to GDP can be done for the cars final price.

The Plastic Factory Sells:

$80 to car factory. This will not be accounted for separately but will be factored in the price of the car

$20 to Government. This will be included as Government expenditure. G

$500-$80-$20 or $400 to customers. This will be included as Consumption. C

Car Factory sells

$50 as export. This will be counted as net export X

$700-$50 = $650 to consumers. This will be counted as consumption C.

So Total GDP : Y = C + I + G + X

Y = $400 + $650 + 0 + $20 + $50 = $1120

So the total GDP of Macroland is $1120. The basic assumption here is that the metal factory and plastic factory has sold to the Car factory which have been used for producing the cars.

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