Assume that a farmer rents a 20-acre farm in the White Creek Valley. During the current year, the farmer produces 100,000 bushels of wheat that he sells to a miller for $300,000 using various farming equipment. The farmer had to borrow from the bank to buy the farming equipment and pays $50,000 interest. Finally, the labor costs are $200,000 and the rent he pays to the owner of the land is $30,000. The miller produces and sells to “Bang Bakery” in Newark 1,000 lbs of flour worth $600,000. The flour is produced in a $100,000 mill in Hockessin; no rent is paid, the wage bill is $180,000 and interest payments are $70,000. Finally, “Bang Bakery” makes and sells bread to the Newark consumers for $1,000,000. The rent for their factory and their stores is $100,000 – their interest payments are $50,000 - their wage bill, $300,000. It was not a good year for “Bang Bakery.” Calculate the contribution to GDP of these transactions using three different methods: The value added approach Value added by the farm: Value added by the mill: Value added by the bakery: Total value added:
Assume that a farmer rents a 20-acre farm in the White Creek Valley. During the current year, the farmer produces 100,000 bushels of wheat that he sells to a miller for $300,000 using various farming equipment. The farmer had to borrow from the bank to buy the farming equipment and pays $50,000 interest. Finally, the labor costs are $200,000 and the rent he pays to the owner of the land is $30,000.
The miller produces and sells to “Bang Bakery” in Newark 1,000 lbs of flour worth $600,000. The flour is produced in a $100,000 mill in Hockessin; no rent is paid, the wage bill is $180,000 and interest payments are $70,000. Finally, “Bang Bakery” makes and sells bread to the Newark consumers for $1,000,000. The rent for their factory and their stores is $100,000 – their interest payments are $50,000 - their wage bill, $300,000. It was not a good year for “Bang Bakery.”
Calculate the contribution to
The value added approach
Value added by the farm:
Value added by the mill:
Value added by the bakery:
Total value added:
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