Question

ABC Computer Company has a $20,000,000 factory in Kanata. During the current year, ABC builds $2,000,000 worth of computer components. ABC's costs are labour, $1,000,000; interest on debt, $100 000; and taxes, $200 000. ABC sells all its output to XYZ Supercomputer. Using ABC's components, XYZ builds four supercomputers at a cost of $800 000 each ($500 000 worth of components, $200 000 in labour costs, and $100 000 in taxes per computer). XYZ has a $30,000,000 factory. XYZ sells three of the supercomputers for $1,000,000 each; at year's end, it has not sold the fourth. The unsold computer is carried on XYZ's books as an $800,000 increase in inventory. a. Calculate the contributions to GDP of these trans-actions, showing that all three approaches give the same answer. b. Repeat part (a), but now assume that in addition to its other costs, ABC also paid $500,000 for imported computer chips.

Answer 1

Answer:

The income, approach refers to the total income generated by the factors of production of all economic goods and services.

The formula to calculate the GDP from income method is as follows:

GDP income= Wages + profits + interest + taxes — subsidies + depreciation

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