Question

Classify each of the following as IN AFRICA's 2020 GDP or NOT IN AFRICA's 2020 GDP. Crude oil (used in the production of...


    • Classify each of the following as IN AFRICA's 2020 GDP or NOT IN AFRICA's 2020 GDP.
    • Crude oil (used in the production of gasoline) produced in 2020: 
    •  IN AFRICA 2020 GDP NOT IN AFRICA 2020 GDP
    • Oil produced by an AFRICA company in AFRICA in 2020 (and sold to consumers): 
    •  IN AFRICAs 2020 GDP NOT IN AFRICA 2020 GDP
    • Oil produced by AFRICA-owned companies outside of AFRICA (and sold to consumers) in 2020: 
    •  IN AFRICA 2020 GDP NOT IN AFRICA 2020 GDP

Answer

GDP is the measurement of the market value of all final goods and services produced within an economy for a given period of time. 

A) Crude oil (used in the production of gasoline) produced in 2020-

NOT IN AFRICA 2020 GDP. The reason is, here crude oil is an intermediate commodity for producing gasoline. Intermediate goods are not part of the GDP calculations. 

B) Oil produced by an AFRICA company in AFRICA in 2020 (and sold to consumers):

IN AFRICA 2020 GDP. Here oil is produced for the final consumption inside the economy in the same year and hence included in GDP calculations. 

C) Oil produced by AFRICA-owned companies outside of AFRICA (and sold to consumers) in 2020:

NOT IN AFRICA 2020 GDP. This is because the commodity is produced outside Africa. Good that produced within an economy are only part of GDP calculations. 

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