Why does an economy's income equals its expenditure.2. A farmer sells wheat to baker for $2. The baker uses the wheat to make bread, which is sold for $3. What is the total contribution of these transactions to GDP?

3. List the four components of GDP.

4. Why do economists use real GDP rather than nominal GDP to gauge economic well-being?

5. Why is it desirable for a country to have a large GDP? Give an example of something that would raise GDP and yet be undesirable.