Question

During a given year, the following activities occur: 1. A silver mining company pays its workers $200,000 to mine 75 pounds of silver. The silver is then sold to a jewelry manufacturer for $300,000. 2. The jewelry manufacturer pays its workers $250,000 to make silver necklaces, which the manufacturer sells directly to consumers for $1,000,000. a. Using the production-of-final-goods approach, what is GDP in this economy

Answer 1

$1,000,000

Step-by-step explanation:

As the name suggests, the production-of-final-goods approach refers to the production of goods should be recorded at the final goods and ignored the intermediary goods. Moreover if the workers earned any income so it would not be relevant for this approach

As in the question there are two goods produced i.e raw silver and silver necklaces

So this means that the raw silver produced the silver necklaces i.e represents the intermediate goods which is not relevant here

So in this case the silver necklaces is only considered i.e $1,000,000