Problem 5 (10 points)
A farm owner pays his workers $1000 to harvest wheat. The farm sells the wheat to a bakery for
$1500. The bakery pays its employees $1250 to bake bread, which it sells directly to its customers
for $5000. This describes all the economic activity in the town of Sourdough.
Show that GDP in Sourdough is $5000, using (1) the expenditure approach, (2) the value-added
approach, and (3) the income approach. For each of the three methods, clearly describe what you
included in your calculations to find GDP using that approach.