The entire economy of the small, rural community of Belleville consists of an accountant and two farms. The accountant does the accounting for both farms and gets paid $50 by each for his services. The corn farm annually sells $200 worth of corn at the market and delivers another $150 to the dairy farm to be used as cattle feed. The dairy farm sells $300 of milk at the market each year.
a) Explain why the definition of gross domestic product (GDP) refers to “final goods”. [3 points]
b) Explain the final goods and value added methods of calculating GDP. [3 points]
c) Calculate the GDP of Belleville using both the final goods and the value added methods,
demonstrating clearly how each method provides your answer. [4 points]