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In 2020, Ford spent $100 thousand to purchase tires from Goodyear. 90% of the ti...

Feb 12, 2024

In 2020, Ford spent

100 thousand to purchase tires from Goodyear. 90% of the tires are used to produce cars which were sold at

800 thousand in that year. The rest 10% were left to make cars next year. Based on the description, how was the GDP of 2020 affected? A. A.Only the cars were the final goods, thus GDP of 2020 increased by

800 thousand. B. Only the cars sold and the tires used should be counted, so GDP of 2020 increased by

890 thousand. C. Both tires and cars were produced in 2020, so GDP of 2020 increased by

900 thousand. D. The value of cars and the inventory of tires should be counted, so GDP of 2020 increased by

810 thousand.

Key Concept

Gross Domestic Product (GDP) Calculation

Explanation

GDP includes the market value of all final goods and services produced within a country in a given period. In this case, it includes the value of the cars sold (

800 thousand) and the change in inventory, which is the tires not sold (

100 thousand * 10% =

10 thousand), totaling

810 thousand for 2020. Intermediate goods, like the tires used to produce the cars, are not counted separately as their value is included in the final product's price.