I was trying to calculate the GDP using the income method, but I don't know what to do with the inputs purchased etc.
Here are the data:
Agriculture:
Total sales --- $50
Capital goods Purchased --- $40
Manufacturing inputs --- $30
Wages --- $20
Operating Surplus --- $10
Manufacturing:
Sales of Capital goods --- $55
Sales of other manufactures --- $155
Capital goods purchases --- $35
Agricultural inputs purchased --- $45
Wages --- $65
Operating surplus --- $25
Could someone please help me out by calculating the GDP using any method? I have tried using the income method and the production method but the answer wouldn't match.
Thank you.
This site might help you.
http://www.sparknotes.com/economics/macro/measuring1/section1.html
To calculate GDP using the income method, you need to sum up all the incomes earned within the economy during a specific time period. In this case, we will calculate the GDP by adding up the incomes earned in the Agriculture and Manufacturing sectors.
First, let's gather the relevant information from the data:
For the Agriculture sector:
- Wages: $20
- Operating Surplus: $10
For the Manufacturing sector:
- Wages: $65
- Operating Surplus: $25
Now, add up the wages and operating surpluses from both sectors to obtain the total income:
Total income = (Wages in Agriculture + Operating Surplus in Agriculture) + (Wages in Manufacturing + Operating Surplus in Manufacturing)
= ($20 + $10) + ($65 + $25)
Calculating this, we find:
Total income = $30 + $90 = $120
Therefore, the GDP using the income method for this economy is $120.
It's worth noting that this method doesn't take into account the purchases of inputs, as those are already accounted for in the value added by each sector (i.e., the difference between total sales and inputs purchased). The income method focuses on the income generated by the various factors of production within the economy.