Question
Suppose Acier France sells 2,000 worth of steel to Renault, other local producers sell 5,000 worth of other inputs to Renault; Renault then uses the
- Suppose Acier France sells 2,000 worth of steel to Renault, other local producers sell 5,000 worth of other inputs to Renault; Renault then uses the steel and other inputs to make a Twingo which it sells to the car dealership for 15,000. And the car dealership then sells the car to a teacher for 18,000.
a. Using the expenditure approach what is the change in GDP made by this entire series of transactions? (That is, starting from Acier France and assuming that Acier France and other local producers do not use intermediate inputs).
b. Using the value-added approach, what is the total contribution to GDP?
c. Suppose the teacher bargains hard, and pushes the car dealership's price down to 15,500. What is the total contribution to GDP then? Does this difference seem odd to you? Does it mean that if people bargain hard, the GDP of a country goes down?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
