ECON 105

How much does an economy actually produce?

Name: Business Tutor
Address: Burnaby, BC, CA
Telephone: +1-604-916-5838
Price range: C$30–C$129

Follow one tiny economy to measure GDP three ways, separate prices from real output, and find output per person. Then practise with ten questions in Solve.

Output and the circular flow · Step 1 of 12

One economy’s spending is another person’s income

Lantern Isle: money moves between buyers and producers

Goods spending and factor incomeTaxes and government purchasesPayments for international trade

Output and the circular flow · Step 1 of 12

One economy’s spending is another person’s income

GDP, or gross domestic product, adds the value of final goods and services produced inside an economy during a year. Our fictional Lantern Isle has a farm, a mill, a bakery and a tool workshop. Households supply labour and other inputs; firms turn them into output and pay factor income.

Try it: Highlight each set of money flows, then change the economy’s size.

Highlight a money flow

Size of Lantern Isle’s annual production1×

Final bread

$4,000

Final tools

$2,000

Annual GDP

$6,000

Final output = bread + tools.

$4,000 + $2,000 = $6,000.

Household income = domestic C + imports + taxes + saving.

$3,200 + $600 + $400 + $1,800 = $6,000.

Check yourself

A household buys bread and the bakery pays wages. Are spending and income separate additions to GDP?

Question 1 of 10Core

From grain to bread: count the value added

In fictional Lantern Isle, Glow Farm sells all its grain to Spark Mill for $180. The mill sells all its flour to Moon Bakery for $420. The bakery sells final bread to households for $780 in the same year. The farm has no bought-in inputs; no firm has other inputs or inventories. Find each firm’s value added and GDP. How much would adding all sales overstate GDP, and why?

Given

Glow Farm grain sales$180

Spark Mill flour sales$420

Moon Bakery bread sales$780

Solution

Producer	Value added
Farm	…
Mill	…
Bakery	…
GDP	…

Add contributions, rather than every sale

Read the question and the givens first. Try the first part yourself, then press Start solving and open the working to check.

Farm value added

Mill value added

Bakery value added

GDP

Overstatement

Exam coming up and GDP still feels like a list of letters?

Bring your problem sets. We work through them together until every type feels routine.

Book a session Next toolNext: Price indexes and inflation

FAQ

Questions, answered.

Still unsure about something? Message us and you will hear back within a day.

See all questions

In person, we meet at the SFU Burnaby campus or in a private meeting room near Brentwood in Burnaby. Online sessions run on Zoom. You choose when you book.
Create a free account, pick your course and a time, and send the request. We review it and confirm by email within 24 hours. The email has your time and place, or your Zoom link for online sessions.
After the session. Nothing is charged when you book.
Tell us within 24 hours and you get a full refund. No forms, no arguing.
Yes, and it is free. Open your account page and choose "Change time or notes" or "Cancel session", or message us on WhatsApp.
SFU Beedie accounting, finance, statistics and economics courses. The full list is on the Courses page. If yours is missing, message us and we will tell you within a day whether we can cover it.
Yes. Two or more students taking the same course can book together and each pays less per hour. Exam prep packages are also available before midterms and finals.
Yes. After each session you get an email report with what was covered, what to practise next and any files from the session. You can re-read them on your account page.

How much does an economy actually produce?

One economy’s spending is another person’s income

One economy’s spending is another person’s income

From grain to bread: count the value added

Exam coming up and GDP still feels like a list of letters?

Questions, answered.

Where do sessions take place?

How do I book, and how do I know it is confirmed?

When do I pay?

What if I am not happy with a session?

Can I move or cancel a session?

Which courses do you cover?

Do you run group sessions?

Do I get notes after the session?