4 Comparing the expenditure and resource cost income approaches for calculating GDP The expenditure and income approaches to calculating GDP arrive at the same final number but they calculate that number in different ways To illustrate consider the possible effects of the following transactions on GDP 1 Shen pays Better Buy 800 to for a new high definition television HDTV and its installation He s attracted by Better Buy s guarantee that he ll be happy with the new HDTV or he ll get his money back 2 Better Buy pays Firedog 650 to install the HDTV 3 Firedog buys hardware worth 50 from The Home Station Compute contributions to GDP using the expenditure approach Assume that The Home Station receives the hardware at no charge and that other costs are zero Hint Add the amount of money spent by buyers of final goods and services Which of the following would be included in the expenditure method of calculating GDP Check all that apply Firedog spends 50 Shen spends 800 Better Buy spends 650 The total contribution to GDP measured by the expenditure method is Now use the following table to compute contributions to GDP employing the income approach In particular indicate the costs of intermediate goods and the value added at each stage of production Sale Value Cost of Intermediate Goods Value Added Stage of Production The Home Station Firedog Better Buy 50 650 800 sale value value added