Economics Question.... GDP

[gopunk]

if ford sells a thunderbird from its inventory, does it affect the GDP?

this question confuses me, if they sell it to a dealership, is it then considered an intermediate good? but the car is made, so is it really an intermediate good? does ford sell directly to consumers?

 

[gopunk]

bump

 

[Hankysmoo]

ya it does

 

[VTHodge]

Any may correct me, but . . .

For any transaction, there is a value added.
Suppliers make parts for $1000 --> sell to Ford for $2000 (GDP increases $1000)
Ford sells car to dealer for $12,000 (GDP increases $10,000)
Consumer buys for $15,000 (GDP increases $3,000)

I think GDP is the measure of the wealth that a nation produces, and that is cause by people adding value to a product.

 

[gopunk]

vthodge -

my understanding is that it is calculated for final goods...

 

[CSoup]

OK,

GDP = C + I + G + NX

When Ford makes the car and puts it into inventory, it is counted as part of the investment part of GDP.
When the car is sold the investment is subtracted and consumption value is added.

So there are several factors you also have to consider like what year was the car put into inventory, in which year it was consumed, and what was the selling price.

But basically in general, selling the car from inventory will affect GDP.
Here is the simple case, car cost 600 to make in 2000 sold for 800 in 2000.
GDP before car made = 1000
GDP after car made and put into inventory = 1600
GDP after car is sold = 1800.

hope that helps

 

[CSoup]

<< Any may correct me, but . . .

For any transaction, there is a value added.
Suppliers make parts for $1000 --> sell to Ford for $2000 (GDP increases $1000)
Ford sells car to dealer for $12,000 (GDP increases $10,000)
Consumer buys for $15,000 (GDP increases $3,000)

I think GDP is the measure of the wealth that a nation produces, and that is cause by people adding value to a product. >>



Yes, value added is one form of calculating GDP. Don't forget to add the initial 1000 dollars that it cost the supplier to make.

 

[VTHodge]

<< Yes, value added is one form of calculating GDP. Don't forget to add the initial 1000 dollars that it cost the supplier to make. >>


You could go back for several more layers if you felt the need.

Iron Mines --> Steel Mill --> Distributors --> Ford's suppliers

The list could really be quite long if you want details.