1. Suppose that bagel production encompasses the following stages: Stage 1: Farmer sells wheat to a miller....
Question:
1. Suppose that bagel production encompasses the following stages:
Stage 1: Farmer sells wheat to a miller. $0.10
Stage 2: Miller sells flour to a baker. $0.30
Stage 3: Baker sells bagel to Tim Hortons. $0.65
Stage 4: Tim Hortons sells bagel to consumer. $0.90
a. What is the value added at each of the four stages?
b. How much does the bagel contribute to GDP?
c. By how much would your answer to b). change if the wheat in Stage 1 were imported from China?
2. From the following figures, calculate GDP using the expenditure approach:
Consumption $2,300 billion
Depreciation $250 billion
Retained earnings $100 billion
Gross investment $650 billion
Imports $350 billion
Social Security taxes $250 billion
Exports $200 billion
Indirect business taxes $300 billion
Government purchases $700 billion
Personal income taxes $800 billion
| Item | Year 1 Quantity | Year 2 Quantity | Year 1 Price | Year 2 Price |
| Cat food | 25 bags | 30 bags | $6.00 | $8.00 |
| Dinner at El Zarape's | 50 meals | 45 meals | $9.00 | $12.00 |
3. Refer to the table above.
a. By what percentage has nominal GDP changed from Year 1 to Year 2? Note: Use the following formula: % change in GDP = Year 2 GDP – Year 1 GDP
Year 1 GDP + Year 2 GDP)/2
b. Using Year 1 as your base year, by what percentage has real GDP changed from Year 1 to Year 2? (Note: Use the formula given above in part 3a).
Expert Answer:
a Value added at each stage Stage 1 Farmer sells wheat to a miller Value added 010 Millers price 000 Farmers cost 010 Stage 2 Miller sells flour to a ... View the full answer
