Why would Michelin Tires have some difficulty in calculating the nominal GDP impact of it’s tire sales? (assuming they’re made in the US)
Ans: Tire sales have the data of sales revenue, but it is difficult to identify the impact upon nominal GDP and it is calculated on a current price. While doing so, it takes different prices of the input materials whose prices are differently taken by the Michelin Tires. It brings inaccuracy to assess the impact upon the nominal GDP. Further, the input materials to make the tires are purchased in the past at a fixed price, but now the price are changed of those materials, when nominal GDP is calculated. It brings difference in price and impact assessment is not accurate. Besides, Michelin Tires have considered different opportunity cost as well as non-paid work if any that are not calculated in nominal GDP. It brings inaccuracy in the assessment of impact upon the nominal GDP.
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Figure 10-9
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a.
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b.
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c.
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d.
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