Question

When a U.S. company purchases and imports wood from Brazil to use to build new houses within the United States, this purchase increases the investment Correct component of GDP while also decreasing Correct net exports by the same amount. Therefore, the purchase of wood from Brazil causesno overall change Correct in US GDP.

Answer 1

GDP represents the total value of all final goods produced within a country. For the given example, despite multiple stages of production, only the value of the final goods, the bookshelves worth $250, is counted towards the nation's GDP. Thus, the GDP of the nation is $250.

Step-by-step explanation:

Gross Domestic Product Calculation

The question at hand involves the calculation of Gross Domestic Product (GDP) for a hypothetical small nation with abundant forests. GDP represents the total value of all final goods and services produced within a country during a specific period, often annually. To calculate this nation's GDP, we consider only the value of final goods to avoid double-counting. This means we take the end products which are not transformed into another product. Given the information, $200 worth of trees were cut down, of which $100 worth was turned into $150 worth of lumber. The final product, $250 worth of bookshelves made from $100 worth of the lumber, is the only value that should be counted towards GDP, as it represents the final good. Therefore, the GDP of the nation is $250.