Consider the following hypothetical scenario. ABC Computer Company has a ₹1.4 billion (Indian rupees) factory in Bangalore, India. During the current year, ABC builds ₹140 million worth of computer components. ABC’s costs for labour are ₹70 million; interest on debt, ₹7 million; and taxes, ₹14 million. ABC sells all its output to XYZ Supercomputer. Using ABC’s components, XYZ builds four super-computers at a cost of ₹56 million each (components worth ₹35 million, labour costs of ₹14 million, and ₹7 million in taxes per computer). XYZ has a ₹2.1 billion factory. XYZ sells three of the supercomputers for ₹70 million each. At year’s end, it had not sold the fourth. The unsold computer is carried on XYZ’s books as a ₹56 million increase in inventory. a. Calculate the contributions to GDP of these transactions, showing that all three approaches give the same answer. b. Repeat part a above, but now assume that, in addition to its other costs, ABC paid ₹35 million for imported computer chips.
Consider the following hypothetical scenario. ABC Computer Company has a ₹1.4 billion (Indian rupees) factory in Bangalore, India. During the current year, ABC builds ₹140 million worth of computer components. ABC’s costs for labour are ₹70 million; interest on debt, ₹7 million; and taxes, ₹14 million. ABC sells all its output to XYZ Supercomputer. Using ABC’s components, XYZ builds four super-computers at a cost of ₹56 million each (components worth ₹35 million, labour costs of ₹14 million, and ₹7 million in taxes per computer). XYZ has a ₹2.1 billion factory. XYZ sells three of the supercomputers for ₹70 million each. At year’s end, it had not sold the fourth. The unsold computer is carried on XYZ’s books as a ₹56 million increase in inventory. a. Calculate the contributions to GDP of these transactions, showing that all three approaches give the same answer. b. Repeat part a above, but now assume that, in addition to its other costs, ABC paid ₹35 million for imported computer chips.
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Consider the following hypothetical scenario.
ABC Computer Company has a ₹1.4 billion (Indian rupees) factory in Bangalore, India. During the current year, ABC builds ₹140 million worth of computer components. ABC’s costs for labour are ₹70 million; interest on debt, ₹7 million; and taxes, ₹14 million.
ABC sells all its output to XYZ Supercomputer. Using ABC’s components, XYZ builds four super-computers at a cost of ₹56 million each (components worth ₹35 million, labour costs of ₹14 million, and ₹7 million in taxes per computer). XYZ has a ₹2.1 billion factory.
XYZ sells three of the supercomputers for ₹70 million each. At year’s end, it had not sold the fourth. The unsold computer is carried on XYZ’s books as a ₹56 million increase in inventory.
a. Calculate the contributions to GDP of these transactions, showing that all three approaches give the same answer.
b. Repeat part a above, but now assume that, in addition to its other costs, ABC paid ₹35 million for imported computer chips.
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