Macro economics help me help ma?

Question

Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and sells it to Couches, Inc., which produces and sells leather furniture. With each $1,000 of leather that it buys from Cowhide, Inc., Couches, Inc. produces a couch and sells it for $2,000. Neither firm had any inventory at the beginning of 2006. During that year, Cowhide produced enough leather for 20 couches. Couches, Inc. bought 80% of that leather for $16,000 and promised to buy the remaining 20% for $4,000 in 2007. Couches, Inc. produced 16 couches during 2006 and sold each one during that year for $2,000. What was the economy's GDP for the year?

$32,000

$36,000

$40,000

$52,000

Answer 1

B) $36,000

Cowhide - value added:

16'000 - sold

4'000 - inventories

Couches - value added:

16*2'000 - internal consumption = 16*2'000 - 16'000 =

= 32'000 - 16'000 = 16'000

GDP=16'000 + 4'000 + 16'000 = 36'000