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26 May 2019
The table below shows the price of inputs and the price of outputs at each step in the production process of making a shirt. Assume that each of these steps takes place within the country.
Cotton farmer Fabric maker Sewing and printing Inputs $0 $1.10 $3.50 Value of output $1.10 $3.50 $18.00
a. Using the standard expenditure method, the total contribution of this shirt to GDP is $_____.
b. If we use a value-added method (i.e., summing the value-added by producers at each step of the production process, equal to the price of inputs minus the price of outputs), the contribution of this shirt to GDP is $_____.
c. If we mistakenly added the price of both intermediate and final outputs without adjusting for value-added, we would find that this shirt contributes $_____ to GDP and this overestimates the true contribution by $_____.
The table below shows the price of inputs and the price of outputs at each step in the production process of making a shirt. Assume that each of these steps takes place within the country.
| Cotton farmer | Fabric maker | Sewing and printing | |
| Inputs | $0 | $1.10 | $3.50 |
| Value of output | $1.10 | $3.50 | $18.00 |
a. Using the standard expenditure method, the total contribution of this shirt to GDP is $_____.
b. If we use a value-added method (i.e., summing the value-added by producers at each step of the production process, equal to the price of inputs minus the price of outputs), the contribution of this shirt to GDP is $_____.
c. If we mistakenly added the price of both intermediate and final outputs without adjusting for value-added, we would find that this shirt contributes $_____ to GDP and this overestimates the true contribution by $_____.
Patrina SchowalterLv2
27 May 2019
