2. Comparing the expenditure and resource cost-income approaches for calculating GDP

The expenditure and resource cost-income approaches to calculating GDP arrive at the same final number, but they calculate that number in different ways. To illustrate, consider the possible effects of the following transactions on GDP:

1.Clancy pays Awesome Foods Market $1,100 to cater his daughter's engagement party. He's attracted by Awesome Foods Market's guarantee that he'll be happy with the catering, or he'll get his money back.2.Awesome Foods Market pays JoAnn's Catering $950 to cater the party.3.JoAnn's Catering buys plasticware worth $200 from Kostko.

Compute contributions to GDP, using the expenditure approach. Assume that Kostko receives the plasticware at no charge and that other costs are zero.

Hint: Add the amount of money spent by buyers of final goods and services.

Which of the following would be included in the expenditure method of calculating GDP?Check all that apply.

Clancy spends $1,100.

Awesome Foods Market spends $950.

JoAnn's Catering spends $200.

The total contribution to GDP, measured by the expenditure method, is .

Now use the following table to compute contributions to GDP, employing the resource cost-income approach. In particular, indicate the costs of intermediate goods and the value added at each stage of production.

Stage of ProductionSale ValueCost of Intermediate GoodsResource Cost-IncomeKostko$200JoAnn's Catering$950Awesome Foods Market$1,100

The contribution to GDP that you found using the expenditure approach corresponds to the sum of the at each stage of production.