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Ziyi is attempting to calculate the GDP of Mexico. She sees that to build a phone in Mexico, a manufacturer spends $30 on batteries, $20
Ziyi is attempting to calculate the GDP of Mexico. She sees that to build a phone in Mexico, a manufacturer spends $30 on batteries, $20 on touch screens, and $100 on computer chips, all to sell the phone for $300. Ziyi calculates the phone being produced at $150 for GDP as the difference between the costs to make the phone and the price it is sold at. Is she correct, and why? She is correct, as GDP measures the sum of the intermediate goods that are used in the production of the good or service. So the impact on GDP should equal the sum of batteries, touch screens, and computer chips. She is correct, as GDP measures the profit made by the sale of items. She is incorrect, as GDP only measures the cost of the product being produced. So the phone should have a $150 effect on GDP from the cost to produce, not the difference between the selling price and cost. She is incorrect, as GDP only cares about the end product produced. So the phone would have a $300 impact on GDP
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