Question

One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. a second bag of flour is sold to a consumer in a grocery store for $2.00. taking these three transactions into account, what is the effect on gdp?

Answer 1

GDP stands for gross domestic product. The GDP allows economist to measure the market value in terms of money. They are measuring the final good or service that is being offered to a customer over any given time. 

Since the first bag of flour is being sold to a bakery to make bread from and sell for $4.00 the GDP of this item is $4.00 because that is the cost a customer is paying.

The second bag of flour is sold to a customer for $2.00 in a grocery store and is the final cost a they are paying.

In this scenario, the GDP for the two products being sold to a customer is $6.00.