Question

One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. a second bag of flour is sold to a consumer in a grocery store for $2.00. taking these three transactions into account, what is the effect on gdp?

Answer 1

Based on the way GDP is calculated, the total effect on GDP will be an increase of $6.00.

Calculating GDP

When calculating the Gross Domestic Product, only final goods are counted. This means that if a good is sold and then used to produce another good, only the price of the good produced will be recorded in GDP to avoid double counting.

The GDP in this scenario will therefore be:

= Price of bread + Price of flor sold to consumer as final good

= 4 + 2

= $6.00

In conclusion, GDP increases by $6.00.

Find out more on double counting at https://brainly.com/question/1112587.