Question

In the small country of Eurasia, people do salmon fishing. They produce canoes and also grow corn. In 2003 they produced 5000 canoes using labor and natural materials only, but sold only 4000, as the economy entered a recession. The cost of producing each canoe was $1000, but the ones that sold were priced at $1250. They fished $30 million worth of salmon. They used $3 million of the salmon as fertilizer for corn. They grew and ate $55 million of corn. What was Eurasia's GDP in 2003? Explain your methodology.

a) $2 million
b) $27 million
c) $30 million
d) $52 million

Answer 1

Eurasia's GDP in 2003 should include the value of all final goods produced which are the canoes sold at $5 million, caught salmon at $30 million, and consumed corn at $55 million, summing up to a GDP of $90 million. None of the provided answer choices are correct.

Step-by-step explanation:

To calculate the Gross Domestic Product (GDP) of Eurasia for 2003, we only consider the value of final goods and services produced. This means we should consider the value of canoes sold, the value of the salmon caught, and the value of the corn consumed, but — importantly — not the intermediate goods like salmon used as fertilizer (since their value is included in the final product).

The total value of canoes sold is 4000 canoes × $1250 per canoe = $5 million. Since only the canoes sold contribute to the GDP, the 1000 unsold canoes are not included.

The total value of the salmon caught is $30 million, and we include this full amount as it is a final good.

As for corn, $55 million worth was grown and consumed. Since this is also a final good, it is included in GDP calculation.

Therefore, the GDP for Eurasia in 2003 is the sum of these: $5 million (canoes) + $30 million (salmon) + $55 million (corn) = $90 million.

So, none of the answer choices given (a) $2 million, (b) $27 million, (c) $30 million, (d) $52 million are correct. The correct answer is not listed among the provided choices.