Question

In the process of making bread: a self-employed farmer who keeps his own seed stock, sells wheat for $100. This goes to a miller, who sells on the flour for $200, using a mill she owns and employees she pays $50. Everytime she uses this mill, a bit of the grind stone comes off, ∼ $5-worth. The baking company buys this flour and makes $300 worth of bread, paying its employees $50 and giving the rest to its shareholders.

(a) What’s the GDP created from this bread? In what expenditure cate- gory does it fall (most likely, if you think there’s more than 1 possible ones, then say that—I can count up to 3 categories). (b) What’s the value added by each firm? (c) To what categories of national income does everything go? Show how this also adds up to GDP. Showing the process ,please!!!

Answer 1

a) GDP created a final value of goods and services = $300 worth bread This bread is bought by consumer. Then this is consumption expenditwee. = 100. b) value added: Final value - input value wheat = 100 - too Flowe : 200 - 100 = 300 Bread . - = 200 100 c) National income = Profit & wages & depricitation B GDP : Not Depriciation . Profit for wheat = 100 " Flowe • 200:-100-50 = 50-5 = 45 u u Bread = 300 - 200 - 50 - 50 195 ... Profitee, wages = 50 + 50 -100 :. Cod. Dog NI- Foo 195 +100 - 295 GBP NI Depriciation = 295+5 = 300