A farmer grows a bushel of wheat and sells it to a miller for $1. The miller turns the wheat into flour and then sells the flour to a baker for $3. The baker uses the flour to make bread and sells the bread to an engineer for $6. The engineer eats the bread. What is the value added by each person? What is the bread's contribution to gdp?

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pristina pristina · Answer 1 · 2018-09-22T15:40:26+02:00

Answer: [tex]Value added by farmer = $1

Value added by miller = $2

Value added by the baker = $3[/tex]

GDP contribution is $6.

Explanation: GDP refers to the market value of final goods and services produced withing the national territory of a country.

Using the value added method, we can calculate GDP by summing up the value added at each level of production.

[tex]Value added by farmer = $1

Value added by miller = $3 -$1 = $2

Value added by the baker = $6 - $3 = $3[/tex]

[tex]GDP = Value added by the farmer +Value added by the miller + Value added by the baker

= $1 + $2 +$3

=$6[/tex]

Or

Using the expenditure approach, GDP is the market value of the final good sold to the customer.

GDP = Cost of bread to the engineer = $6