1NO value 100 points Suppose that furniture production encom

1NO value: 1.00 points Suppose that furniture production encompasses the following stages: Stage 1: Trees are sold to lumber company Stage 2 Lumber is sold to furniture company Stage 3: Furniture company selis furniture to retail store Stage 4: Furniture store sells furniture to consumer $1,100 $1,900 $3,500 $6,750 Instructions: Enter your responses rounded to the nearest whole number (a) What is the value added at each stage? Stage 1: s Stage 2 S Stage 3 s Stage 4 S (b) How much does this output contibute to GDP? (c) How much would the output contibute to GDP if the lumber were imported from Canada?

Solution

(a) Value added at each stage

Stage 1: $1,100

Stage 2: $1,900 - $1,100 = $800

Stage 3: $3,500 - $1,900 = $1,600

Stage 4: $6,750 - $3,500 = $3,250

(b) Contribution to GDP

Sum of Value Added = Contribution to GDP

=> Contribution to GDP = 1,100 + 800 +1,600 + 3,250 = $6,750

(c) Contribution to GDP when lumber is imported

When lumber is imported, the value added of trees getting sold is now no more a contribution to GDP.

=> Contribution to GDP = 1,900 + (3,500 - 1,900) + (6,750 - 3500)

Contribution to GDP = 1,900 + 1,600 + 3,250 = $6,750