Wholesome Wheat Bakery buys $10.00 worth of flour from Mikes' Mill and uses the flour to make bread.Wholesome Wheat sells the bread to the public for $22.00.Taking these two transactions into account,what is the effect on GDP?

Question

Quizplus · Accepted Answer

GDP measures the total value of goods and services produced within a country's borders in a given time period. In this scenario, Wholesome Wheat Bakery purchases $10.00 worth of flour from Mike's Mill, which is considered an intermediate good since it is used to produce another good (bread). Therefore, the purchase of flour from Mike's Mill is not directly included in GDP. However, when Wholesome Wheat Bakery sells the bread to the public for $22.00, the total value of the final good (bread) is added to GDP. Thus, the effect on GDP is an increase of $22.00.

Wholesome Wheat Bakery Buys $10