Question

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00. Taking these four transactions into account, what is the effect on GDP?a. GDP increases by $3.00.b. GDP increases by $5.00.c. GDP increases by $6.00.d. GDP increases by $7.00.

Answer 1

Answer:

Increase in GDP =  $5

correct option is b. GDP increases by $5.00

Explanation:

given data

bake bread sold = $3.00

flour sold = $1

sells to consumer = $2.00

to find out

what is the effect on GDP

solution

we get GDP that is increase is express as

Increase in GDP = flour sold + ( bake bread sold - flour sold  ) + sells to consumer   ..................1

put here value we get by equation 1

Increase in GDP = $1 + ( $3 - $1 ) + $2

Increase in GDP =  $5

correct option is b. GDP increases by $5.00