The Impact of Bobo's Brews on Domestic GDP
How does Bobo's Brews contribute to the domestic GDP through its transactions?
Explore the value added by Bobo's Brews in different scenarios and calculate its total contribution to domestic GDP.
Answer:
Bobo's Brews, a domestic firm located in Toronto, plays a significant role in contributing to the domestic GDP through its various transactions with other entities.
In each scenario provided, we are presented with insights into Bobo's Brews' operations and its impact on the domestic economy. Let's analyze the different scenarios and calculate the value added by Bobo's Brews as well as its total contribution to the domestic GDP.
Scenario (a):
In 2025, Bobo's Brews imported $25,000 worth of coffee beans from Ethiopia. By deducting the value of imported inputs from the revenue generated from selling the final product, we can calculate the value added. Therefore, the value added by Bobo's Brews in 2025 is $725,000, which contributes to the domestic GDP.
Scenario (b):
In 2026, the coffee beans were sent to Gonzo Roasters for roasting, and they were then sent to Bobo's Brews in exchange for $75,000. Bobo's Brews' value added in this scenario is $750,000, contributing to the domestic GDP.
Scenario (c):
In 2027, Bobo's Brews hired the accounting firm Toronto Numbers and paid them $70,000. Additionally, Zara was hired by Toronto Numbers for $64,000. The total value added by Bobo's Brews in this scenario is $134,000, which also contributes to the domestic GDP.
Scenario (d):
In 2028, Bobo's Brews switched to Mumbai Numbers for accounting services and paid them $55,000. The value added by Bobo's Brews in this scenario is $55,000, contributing to the domestic GDP.
The total contribution to domestic GDP by Bobo's Brews is the sum of the value added in each scenario, which can be calculated by adding up the value added in scenarios (a), (b), (c), and (d).
By understanding how Bobo's Brews adds value and contributes to the domestic GDP through its transactions, we can appreciate the impact of domestic firms on the overall economy.