Question

For the following transactions, determine the contribution to the current year's GDP. Explain the effects on the product, income, and expenditure accounts.

(please type in word format otherwise I may not recognize your handwriting )

a. The Japanese build an auto plant in Quebec for $100,000,000 using only local labour and materials.

HINT : The auto plant is a capital good produced by canadians and purchased by the japanese

Answer 1

ANSWER:

A) Product approach : $100 million of a capital good and it is produced with local labor and materials , it will be added to the canadian GDP.

B) Income approach: $100 million paid to canadian factors of production.

C) Expenditure approach: $100 million net exports since the plant is owned by the japanese. (because plant is not a capital good)