2. Comparing the expenditure and resource cost-income approachesfor 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.	Antonio pays Better Buy $1,100 to for a new high-definition television (HDTV) and its installation. He's attracted by Better Buy's guarantee that he'll be happy with the new HDTV, or he'll get his money back.
2.	Better Buy pays Firedog $750 to install the HDTV.
3.	Firedog buys hardware worth $100 from The Home Station.

Compute contributions to GDP, using the expenditure approach. Assume that The Home Station receives the hardware 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.

Better Buy spends $750.

Antonio spends $1,100.

Firedog spends $100.

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 Production	Sale Value	Cost of Intermediate Goods	Resource Cost-Income
The Home Station	$100
Firedog	$750
Better Buy	$1,100

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

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