Coffee Purchases Contribution to GDP

What is the contribution to GDP from the purchases of coffee beans and coffee?

How does the purchase of coffee beans and coffee impact the Gross Domestic Product (GDP)?

Final answer:

The purchases of coffee beans and coffee contribute to the Gross Domestic Product (GDP) as they are part of the final goods and services produced and consumed within the country.

Gross Domestic Product (GDP) is a measure of the total value of all final goods and services produced within a country's borders in a specific time period. It includes consumption, investment, government spending, and net exports.

In this case, the purchases of coffee beans and coffee contribute to GDP as they are part of the final goods and services produced and consumed within the country. The sale of one bag of coffee beans to the cafe for $5 is considered a transaction in the production of coffee. The cafe then uses the coffee beans to brew coffee, which it sells to customers for a total of $22. This sale of coffee to customers is also considered a transaction in the production of coffee.

Similarly, the sale of the second bag of coffee directly to Mary for $5 is also considered a transaction in the production of coffee. Mary uses the coffee to brew coffee for her family every morning, which is a consumption activity.

Therefore, both the purchases of coffee beans and the sale of coffee contribute to GDP as they represent economic activities within the country.