Friday, January 25, 2013


Alzheimer’s problem of the day.  Wonderland only has three companies.  One is a bread company, another is a cheese, and the last is Juan’s Pizzeria.  Juan uses labor to make his pizza.  The difference between the value of sales and the intermediate goods used to make the pizza is the value added.  Find GDP by adding up the factor income, estimating the value of final sales, and summing the value added.

 My answers are $200 for all three approaches.  Since intermediate goods aren't included, I will wager that many thought the answer was $285.  

For lighter reading, here's a cartoon that lampoons GDP accounting.

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