Question

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00. Taking these four transactions into account, what is the effect on GDP?

a. GDP increases by $3.00.
b. GDP increases by $5.00.
c. GDP increases by $6.00.
d. GDP increases by $7.00.

Answer 1

B. GDP increases by $5.00.

Step-by-step explanation: