Problem
Imagine an economy with six industries:
• Tomato farmers grow $80 worth of tomatoes and sell $30 worth to the public, the rest to pizza-makers.
• Wheat farmers raise $60 worth of wheat and sell the whole crop to the flour mills.
• Dairy farmers sell $70 worth of milk to cheese-makers and $20 worth to the public.
• Cheese-makers produce $130 worth of cheese. They sell $80 worth to the pizza-makers and the rest to the public.
• Flour mills grind $140 worth of flour; $50 is sold to the public and $90 to pizza-makers.
• Pizza-makers produce $290 worth of pizzas.
For each of the following questions show all of your calculations.
• If these are all of the transactions that take place in this economy, in a year, calculate the value-added for each industry.
• Using the value added from part a, calculate the GDP for this economy?
• What is the aggregate spending on newly produced final goods and services, in this economy?