Question

Assume that a grower of flower bulbs sells its annual output of bulbs to an internet retailer for $70,000. the retailer, in turn, brings in $120,000 from selling the bulbs directly to final customers. instructions: enter your answer as a whole number. what amount would these two transactions add to personal consumption expenditures and thus to gdp during the year?

Answer 1

GDP is defined as gross domestic product or the total value of all goods consumed within the course of a year. GDP also takes into account business investment and therefore the 70,000 that the internet retailer purchases is a business expenditure so that would add 70,000 while the 120,000 that is sold to final customers would be the personal consumption expenditure. It also would not matter if the $120,000 is earned abroad or at home since any revenue earned abroad would be considered an export. Therefore, the total contribution to GDP would total the sum of the two numbers or $190,000.