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Chapter 7: Q10. (page 152)

Suppose GDP is \(5.0 trillion, depreciation is \)1 trillion, and gross output (GO) is $17.25 trillion.

a. What is the value of all stages of production and distribution except for final sales of goods and services?

b. What is the dollar value of the economic activity taking place at every stage of production and distribution?

Short Answer

Expert verified

  1. $12.5 trillion

  2. $17.5 trillion

Step by step solution

01

Explanation for part (a)

The value of all stages of production and distribution except for final sales of goods and services is the difference between the gross output and GDP. The gross output is the sum of the total value of the sales at each stage of production and distribution.

Total value of all stages except final sales = GO - GDP

= $17.5 trillion - $5 trillion

= $12.5 trillion

02

Explanation for part (b)

The dollar value of economic activities at every stage of production and distribution of a good or service is given by the Gross output (GO) and hence is equal to $17.5 trillion.

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Most popular questions from this chapter

Explain why an economy’s output, in essence, is also its income.

Using the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All figures are in billions.

If in some country personal consumption expenditures in a specific year are \(50 billion, purchases of stocks and bonds are \)30 billion, net exports are −\(10 billion, government purchases are \)20 billion, sales of secondhand items are \(8 billion, and gross investment is \)25 billion, what is the country’s GDP for the year?

Suppose that this year’s nominal GDP is \(16 trillion. To account for the effects of inflation, we construct a price-level index in which an index value of 100 represents the price level 5 years ago. Using that index, we find that this year’s real GDP is \)15 trillion. Given those numbers, we can conclude that the current value of the index is:

a. higher than 100.

b. lower than 100.

c. still 100.

Why do national income accountants compare the market value of the total outputs in various years rather than actual physical volumes of production? What problem is posed by any comparison over time of the market values of various total outputs? How is this problem resolved?
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