A Bigg Boss 16 12th October onli x Learn: ECON 2201 MIDTERM 1 X Homework Help - Q&A from Or X midterm_question_and_solution X ECON 2201 : Intermediate Mac X + C @ File | /Users/deepaksharma/Downloads/midterm_question_and_solution.pdf To W Q APES Chapter 12... G nekton definition -... M Gmail YouTube Maps Halftime Forex Factory Netflix f Facebook E midterm_question_and_solution.pdf 5 / 6 100% 2. Consider an economy in which there are only three productive activities: a bakery, a mill, and a farm. In a year the farm grows corn and sells it to the bakery for $7. Since the bakery needs flour they have to use the mill's services for $6 a year. There are 6 people in this economy: three people are workers (one in each business) and three people are capitalists (each one owns one business). Each worker is paid $3 a year which they spend entirely on bread. The farm owner buys $4 of bread every year, the mill owner buys $3 of bread every year, and the bakery owner consumes $2 worth of her own bread. (a) Calculate GDP in this economy, using the final goods method. (b) Recalculate GDP using the added value method. Final goods method There is only one kind of final goods in this economy: bread. The total amount of bread produced and sold is equal to GDP = $3 x 3 + $4 bread purchased by workers farm owner purchase + $3 + = $18 mill owner purchase bakery owner purchases Value added method The VA of both the mill and the farm are equal to their revenues because they don't use any intermediate goods. There- fore V Amill = $6, V Afarm = $7 The bakery uses two intermediate goods: corn and mill services. The VA of the bakery is V Abakery = $18 $6 $7 = $5 bakery's total revenue mill's services corn purchases Therefore GDP = $6 + $7 + $5 = $18