Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: National Income Accounting

Question:
  Firm A Firm B
Sale 200 500
Inter mediate Consumption 0 x
Value    

If GDP = 600, then Intermediate consumption of firm B is :

Options:

100

700

200

500

Correct Answer:

100

Explanation:

The correct answer is option (1) : 100

- Firm A: Sales : 200,  Intermediate Consumption : 0

- Firm B :- Sales : 500, Intermediate Consumption : ?

For Firm A: Value Added (A) = Sales (A) - Intermediate Consumption (A)

                                          = 200- 0 = 200

The Gross Domestic Product (GDP) is given as 600.

GDP is calculated by summing up the value added at each stage of production. The value added is the difference between sales and intermediate consumption.

GDP = Value Added (A) + Value Added (B)

600 = 200 + Value Added (B)  

Value Added (B)= 400

Now, For Firm B :

Value Added (B) = Sales (B) - Intermediate Consumption (B)

400 = 500 - Intermediate Consumption (B)

Intermediate Consumption (B) = 500-400 = 100