2 GDP (24 Points) The Bakery uses $500 worth of wheat to make bread. The Restaur

Question

2 GDP (24 Points) The Bakery uses $500 worth of wheat to make bread. The Restaurant uses $500 worth of wheat to make food and $1,000 worth of baked goods. Consumers directly consume the remaining $1,000 worth of baked goods. Wheat Farmer Ba kery Restaurant s Office Revenue 1,000.00 2,000.00 3,000.002,500.00 Intermediate good Wages S 300.00 600.00 800.00 1,500.00 Interest Taxes 50.00 $ 100.00 $ 50.00100.00 400.00 50.0050.00$ 40.00 $ we discussed in class. (12 a) Refer to Figure 2. Calculate GDP 3 times using the separate approaches Points) b) Refer to Figure 2. Assume in addition that $700 of wheat gets imported. Out of these $300 is used by the Bakery as intermediate good and the rest is used by households to make bread at home. Aso a at benefits to laid-off uses it to pay t

Explanation / Answer

GDP while being calculated must avoid repeated counting. Hence all the costs incurred to make final products are calculated.

GDP = sum of revenues

GDP = goods + wages + interest + Taxes + profits
Wheat Farmer produces 1000 worth of wheat
Baker adds 1500 worth to this by putting his labour into it.
The Restaurant uses goods worth 1500 and adds worth of 1500 more by putting his labour into it.
The lawyer puts in his labour independently so he adds 2500 worth to the economy.

Total GDP = 1000+ 1500 + 1500 + 2500 = 6500

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