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ABC Computer Company has a $20 million factory in Silicon Valley in which in builds computer components. During the current year, ABC's costs are labor
ABC Computer Company has a $20 million factory in Silicon Valley in which in builds computer components. During the current year, ABC's costs are labor (wages) of $0.5 million; interest on debt of $0.2 million; and taxes of $0.2 million. ABC sells all its output to XYZ Supercomputer for $2.0 million. Using ABC's components, XYZ builds four supercomputers at a cost of $0.300 million each, which comes from $0.500 million worth of components, $0.2 million in labor costs. and $0.1 million in taxes per computer. XYZ has a $30 million factory. XYZ sells three of the supercomputers to other businesses for $1.8 million each. At year's end, it had not sold the fourth. The unsold computer is carried on XYZ's books as a $0.800 million increase in inventory. According to the product approach, the total GDP contribution of these companies is $ million. According to the product approach, the total GDP contribution of these companies is $ million. According to the expenditure approach, since the three supercomputers are sold to businesses, XYZ's sales are counted as The unsold computer is Thus the total contribution to GDP, using the expenditure approach, is $|million. According to the income approach, the contributions of these companies would be counted as follows: Wages to ABC employees = $ | million. Wages to XYZ employees = $ million. Profit of ABC = $ million. Profit of XYZ = $ million. Taxes paid by ABC = $ |million. Taxes paid by XYZ = $ |million. Interest paid by ABC = $ |million. Interest paid by XYZ = $ million. Thus the total contribution to GDP, using the income approach is $ million
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