Question

A. general electric uses $10 million worth of glass, steel, and plastic to produce dishwashers. wages and salaries in the dishwasher division are $40 million; the division's only other expense is $15 million in interest that it pays on its bonds. the division's revenue for the year is $75 million. (hint: you can use either of our two methods to calculate this, one is easy, the other is more difficult)

Answer 1

Expenditure Method, GDP is the value of the final good sold in the market. So, GDP will rise by $75 million.

Using the Factor payments approach,

`GE’s profit = Revenue - Cost   =$75 million – ($10 + $40 + $15)   = $10 million.`

Wages and salaries and interest paid by
`GE = $40 + $15 = $55.`

Adding GE's profit and its factor payments we get,

`= $10 + $10 + $55   = $75 million`

Thus, GDP by both the methods is $75 million.