How does GDP accounting record the following events? For each of them, describe how they would be computed in GDP accounts using the income method, the production method, and the expenditure method.
(a) Tom purchases a Volkswagen from Germany from his start up ride sharing business for $20,000. He provides ride sharing services earning him a net revenues of $40,000. During the course of the year the Volkswagen depreciates by $2,000. Tom has no other costs.
(b) An army battalion is deployed to the border to repel a threatened Canadian invasion. The soldiers earn wages of $10,000 and use ammunition that the government bought for $5,000. The ammunition was produced using $2,000 of imported steel and 100 hours of work, for which the workers were paid $1,000. Hint: two things are produced in this example, what is the value added for each of them?
(c) The government collects $1000 in income taxes from Pam.
(d) Pam earns $4000 for working as a babysitter and pays $1000 in income taxes.
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How does GDP accounting record the following events? For each of them, describe how they would be co...
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