Macroeconomics

Learn the toughest concepts covered in your Macroeconomics class with step-by-step video tutorials and practice problems.

Gross Domestic Product (GDP) and Consumer Price Index (CPI)

Value Added Method for Measuring GDP

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Value Added Method for Measuring GDP

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Problem

A cotton farmer produces raw cotton, which it can sell to a processor at a price of $2. The processor weaves the cotton into fabric and sells it for $3. A clothing company purchases the fabric and creates a crappy t-shirt, which it can sell for $7. Urban Outfitters buys crappy t-shirts and resells them for $45. What is the value added by the clothing company?