Answer to Question #277211 in Macroeconomics for Shiv

Question

In a hypothetical economy, farmers grows wheat, which he sells to a miller at 50,000.the miller turns the wheat into flours,and sells to a backer for 70,000. The backer turns the wheat into bread and sells to the consumers for 1,10,000. Consumers eat bread.

A) compute gdp by using value added approach clearly mentioning value added at each activity level

B)does this example suggest another way of computing gdp, other than value added approach? If yes, suggest the name of the approach,compute gdp and compare the result which you found with the value of gdp computed by value added approach

Answer 1

A) GDP by using value added approach is 110,000, because the production of wheat and flour is intermediate production, which is not used in calculations.

B) Another two methods of GDP calculation are income and expenditure methods.