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 $160,000 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? $ .
Question
Assume that a grower of flower bulbs sells its annual output of bulbs to an Internet retailer for 160,000 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? $ .
Solution
The amount these two transactions would add to personal consumption expenditures and thus to GDP during the year would be $160,000.
Here's why: GDP measures the market value of all final goods and services produced within a country in a given period. The keyword here is "final". In this case, the final good is the flower bulbs sold to the final customers by the Internet retailer. The transaction between the grower and the retailer is not counted in GDP to avoid double counting. Therefore, only the retailer's sales to the final customers, which amounts to $160,000, is counted in the GDP.
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