Question

Graincorp, a U.S. agricultural company, produces corn syrup at a plant in Iowa on September 13, 2017. It sells the corn syrup to Crunchy's for use in the production of cereal that will be made in the United States in 2017. (Note: Focus exclusively on whether production of the corn syrup increases GDP directly, and ignore the effect of production of the cereal on GDP.)

Answer 1

The answer is: Graincorp's production is not included in the GDP

Step-by-step explanation:

The GDP includes the total production of final and legal goods and services. Since Graincorp produces corn syrup, which is later used by Crunchy's to produce breakfast cereal, we can consider corn syrup as an intermediate good. Intermediate goods are not included in the GDP.

The selling price of Crunchy's cereal should already include the value of all its inputs (including corn syrup).