Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![The table below shows the price of inputs and the price of outputs at each step in the production process
of making a shirt. Assume that each of these steps takes place within the country.
Cotton farner
Fabric maker
Sewing and printing
$3. 50
$18. 00
$0
$1. 10
Inputs
Value of output
$1. 10
$3. 50
Instructions: Round your answers to the nearest cent.
a. Using the standard expenditure method, the total contribution of this shirt to GDP is $|
b. If we use the value-added method (i.e., summing the value added by producers at each step of the
production process, which equals the price of inputs minus the price of outputs), the contribution of this
shirt to GDP is $
c. If we mistakenly add the price of both intermediate goods and final outputs without adjusting for the
value added, we would find that this shirt contributes $
to GDP.
This overestimates the true contribution by $](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3243f77d-bc2d-4c71-a068-4d9d2cf2cdd1%2F66882092-c928-49ef-9270-2a3daca0639a%2Ffgij4v_processed.png&w=3840&q=75)
Transcribed Image Text:The table below shows the price of inputs and the price of outputs at each step in the production process
of making a shirt. Assume that each of these steps takes place within the country.
Cotton farner
Fabric maker
Sewing and printing
$3. 50
$18. 00
$0
$1. 10
Inputs
Value of output
$1. 10
$3. 50
Instructions: Round your answers to the nearest cent.
a. Using the standard expenditure method, the total contribution of this shirt to GDP is $|
b. If we use the value-added method (i.e., summing the value added by producers at each step of the
production process, which equals the price of inputs minus the price of outputs), the contribution of this
shirt to GDP is $
c. If we mistakenly add the price of both intermediate goods and final outputs without adjusting for the
value added, we would find that this shirt contributes $
to GDP.
This overestimates the true contribution by $
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