Bountiful Harvest Bakery buys $4.00 of flour from Grinkers' Mill and uses the flour to make bread sold to the public for $12.00. Taking these two transactions into account, what is the effect on GDP?

Question

Quizplus · Accepted Answer

The purchase of flour from Grinkers' Mill adds $4.00 to GDP as it is a final good. The production and sale of bread also adds $12.00 to GDP as it is a final good. Therefore, the total effect on GDP is an increase of $16.00 ($4.00 + $12.00).

Bountiful Harvest Bakery Buys $4