Homework Answers
1) Value added by farmer = $1 (The value added will be equal to the amount at which it sold to the miller)
2) The miller’s added value = $(3-1) = $2 (The value added by the miller is the difference between the amount at which it bought wheat from the farmer and the amount at which it sold to the baker.)
3) The baker’s added value = $(6-3) = $3 (The value added by the baker is the difference between the amount at which it bought floor from the miller and the amount at which it sold bread to the engineer.)
4) The bread’ contribution to GDP = $(1+2+3) = $6 ( The contribution will be equal to the value added at each stage of production.)
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consumers for $155. Consumers eat the bread.
Assume that the above transactions account for all economic
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Assume that the above transactions account for all economic
activity in an economy.
GDP in this economy is $______
Value added is defined as the value of a producer’s output...
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