ABC Computer Company has a $25,000,000 factory in Kanata. During the current year, ABC builds $3,200.000 worth of computer components. ABC's costs are labour, $1,600,000; interest on debt, $100,000; and taxes, $50,000. ABC sells all its output to XYZ Supercomputer. Using ABC's components, XYZ builds four supercomputers at a cost of $1,150,000 each ($800,000 worth of components, $150,000 in labour costs, and $200,000 in taxes per computer) XYZ has a $40,000,000 factory. XYZ sells three of the supercomputers for $1,500,000 each; at year's end, It has not sold the fourth. The unsold computer is carried on XYZ's books as a $1,150,000 increas- in inventory. Assume that ABC and XYZ are incorporated companies, and that XYZ sells to companies. a. Calculate the contributions to GDP of these transactions, showing that al three approaches give the same answer. Using the product approach, the value added by ABC is $ 3,200,000, the value added by XYZ is $ 2,450,000', and the total contribution to GDP of these transactions is $ 5,650,000. Using the expenditure approach, private consumption expenditure is $0', investment is $ 5,650,000'. government purchases of goods and services an $0, net exports are $0, and GDP is $ 5,650,000. Using the income approach, compensation of employees is $ gross operating surplus is $. gross mixed income is S. taxes iess subsidies on production are $ taxes less subsides on products and imports are $, and GDP is S
ABC Computer Company has a $25,000,000 factory in Kanata. During the current year, ABC builds $3,200.000 worth of computer components. ABC's costs are labour, $1,600,000; interest on debt, $100,000; and taxes, $50,000. ABC sells all its output to XYZ Supercomputer. Using ABC's components, XYZ builds four supercomputers at a cost of $1,150,000 each ($800,000 worth of components, $150,000 in labour costs, and $200,000 in taxes per computer) XYZ has a $40,000,000 factory. XYZ sells three of the supercomputers for $1,500,000 each; at year's end, It has not sold the fourth. The unsold computer is carried on XYZ's books as a $1,150,000 increas- in inventory. Assume that ABC and XYZ are incorporated companies, and that XYZ sells to companies. a. Calculate the contributions to GDP of these transactions, showing that al three approaches give the same answer. Using the product approach, the value added by ABC is $ 3,200,000, the value added by XYZ is $ 2,450,000', and the total contribution to GDP of these transactions is $ 5,650,000. Using the expenditure approach, private consumption expenditure is $0', investment is $ 5,650,000'. government purchases of goods and services an $0, net exports are $0, and GDP is $ 5,650,000. Using the income approach, compensation of employees is $ gross operating surplus is $. gross mixed income is S. taxes iess subsidies on production are $ taxes less subsides on products and imports are $, and GDP is S
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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6.
Transcribed Image Text:ABC Computer Company has a $25,000,000 factory in Kanata. During the current year, ABC bulds $3,200.000 worth of computer componants. ABC's
costs are labour, $1,600,000; interest on debt, $100,000; and taxes, $50,000.
ABC sells all its output to XYZ Supercomputer. Using ABC's components, XYZ builds four supercomputers at a cost of $1,150,000 each ($800,000
worth of components, $150,000 in labour costs, and $200,000 in taxes per computer). XYZ has a $40,000,000 factory. XYZ sells three of the
supercomputers for $1,500,000 each; at year's end, it has not sold the fourth. The unsold computer is carried on XYZ's books as a $1,150,000 increase
in inventory. Assume that ABC and XYZ are incorporated companies, and that XYZ sells to companies.
a. Calculate the contributions to GDP of these transactions, showing that all three approaches give the same answer.
Using the product approach, the value added by ABC is $ 3,200,000), the value added by XYZ is $ 2,450,000', and the total contribution to GDP of
these transactions is $ 5,650,000.
Using the expenditure approach, private consumption expenditure is $0', investment is $ 5,650,000'. government purchases of goods and services are
$0, net exports are $ 0, and GDP is $ 5,650,000.
Using the income approach, compensation of employees is $, gross operating surplus is $. gross mixed income is $, taxes less subsidies on
production are $ taxes less subsides on products and imports are $, and GDP is $.
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