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The following diagram shows select information for an economy made up of three industries for a particularly year.Dollar flow in an economy_exam.jpg

What is the gross domestic product (at market prices) for this economy?

Group of answer choices

$600 billion

$270 billion

$400 billion

$430 billion

none is correct

The diagram you provided represents the flow of income and expenses between three industries in an economy. To calculate the Gross Domestic Product (GDP) at market prices, we need to consider the total value of the final products sold by each industry. According to the diagram, the values of final goods (denoted by $ f $) are as follows:

- Industry 1: $ f = 40 $ billion
- Industry 2: $ f = 160 $ billion
- Industry 3: $ f = 0 $ billion

The GDP is the sum of all the final products sold by all industries, which can be calculated by adding up the final products:

\[
GDP = f_1 + f_2 + f_3 = 40 + 160 + 0 = 200 \text{ billion}
\]

However, this is only considering the final products. If intermediate inputs and wages (i+w+r+p) are being counted directly or have any additional final output not covered, further clarification could be needed. From the diagram's direct values of final products alone, though, the GDP based on final goods only is 200 billion.

Given that none of the options match this value directly, and assuming this method based on the final products in the diagram is correct, it appears that **"none is correct"** is the best choice.

Do you want to explore the intermediate flow calculations further, or is the concept clear? Let me know if you'd like more details.

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Here are five questions to deepen your understanding:

1. How do intermediate inputs impact GDP calculation in a circular flow model?
2. What distinguishes final goods from intermediate goods in calculating GDP?
3. Could there be another method to calculate GDP, such as using income flows?
4. Why is the final product value used as a measure of GDP in this type of model?
5. How does the "value-added" approach relate to calculating GDP?

**Tip:** Always ensure you're using final products when calculating GDP to avoid double counting intermediate goods.

The following diagram shows select information for an economy made up of three industries for a particular year. What is the gross domestic product (at market prices) for this economy? Group of answer choices: $600 billion, $270 billion, $400 billion, $430 billion, none is correct.

Learn how to calculate the Gross Domestic Product (GDP) at market prices using a circular flow model of an economy with three industries. Understand the key economic concepts and mathematical formulas involved. Suitable for students in Grades 11-12.

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