What is the country's gross domestic product at factor cost?

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ScanSolve AI Tutor · Accepted Answer

Here's the solution to question 125: 125. The table below shows incomes earned by factors of production in a year. What is the country's gross domestic product at factor cost? To calculate Gross Domestic Product (GDP) at factor cost using the income approach, we sum up all the incomes earned by the factors of production. This includes compensation of employees, operating surplus (profits, rent, interest), and consumption of fixed capital (depreciation). Stock appreciation is a capital gain and is not included in GDP. Step 1: Identify the components of GDP at factor cost from the table. Income from employment: $800,000 Income from self employment: $500 Gross trading profits of companies: $950,500 Gross trading surpluses of nationalised industries: $4,000 Gross trading surplus of general/government enterprises: $5,000 Rent: $60,000 Imputed charge of consumption of non-funded capital (this represents depreciation, which is included in Gross Domestic Product): $80,000 Step 2: Exclude items that are not part of GDP at factor cost. Stock appreciation: $50,000 (This is a capital gain, not income from current production, so it is excluded). Step 3: Sum the relevant components to find the GDP at factor cost. GDP at Factor Cost = 800,000 + 500 + 950,500 + 4,000 + 5,000 + 60,000 + 80,000; GDP at Factor Cost = 1,900,000 The country's gross domestic product at factor cost is $1,900,000. The correct option is C. $1 900 000 billion. (Note: The "billion" in the options seems to be a unit discrepancy, but the numerical value matches.)

What is the country's gross domestic product at factor cost?

Answer

Step-by-step solution

Identify the components of GDP at factor cost from the table.

Exclude items that are not part of GDP at factor cost.

Sum the relevant components to find the GDP at factor cost.

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