Answer to Question #48796 in Macroeconomics for MUHAMMAD Abid

Question

A farmer grows a bushel of wheat and sells it to a miller for $1,the miller turns the wheat into floar and sells it to a baker for 3$.
The baker uses the floar to make a floar and sells it to consumer for 6$.
FIND
1.Value added in each stage of production?
2.GDP?
NOTE; The value of the finished goods already includes the value of the intermediate goods.So, including intermediate goods in GDP would be 'double counting'

Answer 1

1.The value added in 1 stage of production is $1, in 2 stage is 3 - 1 = 2$, in 3 stage 6 - 3 = $3.
2.GDP is the final value added of production during all stages, so: GDP = 1 + 2 + 3 = $6.