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Unformatted text preview: Explain why GDP measured through the value added approach would have a problem of
If statistics agents are incapable of distinguish between intermediate goods and final goods
produced in an economy. then they would mistakenly take value of output produced from
each stage of production into total value-added. 1 / 3 SFU Econ 105 Week 5 Summer 2013 3. Suppose, in a given year, a Canadian resident buys a Ford automobile for $30,000. The
same year, Ford produced the car in Ontario, using $10,000 in parts imported from
Japan. However, the parts imported from Japan themselves contained $3,000 in
components produced in Canada.
a. Using the value-added approach, determine how much Canada's GDP rose in the given
∆GDP Canada = ∆total value added = $20,000 (from production of a Ford automobile) +
$3,000 (from production of components in Canada) = + $23,000
b. Using the expenditure approach, what is the change in each component (Ca, Ia, Ga and NXa)
of Canada's GDP? Explain.
Ca = +$30,000
NXa = +$3,000 - $10,000 = - $7,000
c. What is the change in Japan’s GDP and each of its components? Explain.
∆GDP Japan =∆NX = $10,000 – $3,000 = +$7000 4. Below is information from the Canada’s economy in 2010. Complete the table below by
ticking one of the expenditure categories for each situation.
(All figures are from Canada’s economy unless specified)
Situations Ca Expenditure on 2008 model vehicles (produced in Ontario) by Canadian households Ia Ga NXa None x Expenditure on Chinese wheat (produced in 2009) by flour producers x Expenditure on RRSPs by Canadian households Expenditure on African coffee beans for beverages by Starbucks x Wage paid to Canadian workers working for US owned firms Expenditure on the Old Age Security program by the Federal government x x x Expenditure on construction of new residential housings in BC x Expenditure on repaving No.1 Hwy by the BC governm...
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