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5 May, 20:50

A steel company sells some steel to a bicycle company for $150. produce a bicycle, which it sells for $250. Taken together, these two transactions contribute.

a. $150 to GDP.

b. $250 to GDP

c. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.

d. $400 to GDP.

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Answers (1)
  1. 5 May, 23:33
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    The correct answer is option (B).

    Explanation:

    According to the scenario, the given data are as follows:

    Amount to produce bicycle = $150

    Bicycle sells price = $250

    So, Value added = Bicycle sells price - Amount to produce bicycle

    = $250 - $150

    = $100

    So, we can calculate increase in GDP by the following method:

    Contribution to GDP = Value added + Amount to produce bicycle

    = $100 + $150

    = $250

    Hence, the contribution to GDP is $250.
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