Question

Text Box 2. should the following transactions be included in GDP for Canada? Explain why or why not.If included, specify through C, u Gorx a. Coca-Cola builds a new bottling plant in Canada. b. Air Canada sells one of its existing airplanes to Korean Air. c. Ms. Moneybags buys an existing share of Telus Corporation stock. d. A softwood lumber firm in British Columbia sells softwood lumber to a construction company in California. A Canadian buys a bottle of French perfume in Paris. A book publisher produces too many copies of a new book; the books don't sell this year, so the publisher adds the surplus books to inventories. Banking services bought by Loblaws. New coffee grinders bought by Second Cup. Starbucks grande mocha Frappuccino bought by a student at a campus coffee bar. e. f. g. h. i.

Answer 1

2. (a) Coca cola builds a new bottling plant in Canada : It is an investment spending (I) and included in GDP.

(b) Air Canada sells one of its existing airplanes to Korean Air.: This transaction is not included in GDP because it does not represent producing during current time period, it is just a sale of a used item.

(c) Ms. Moneybags buys an existing share of Telus corporation stock: This transaction is not included in GDP because there is no production , it is just the purchase of an existing share.

(d) A softwood lumber firm in British Columbia sells softwood lumber to a construction company in California. : It is a Canada export and is included in Canada's GDP.

(e) A Canadian buys bottle of French perfume in Paris. : When a Canadian buys bottle of French perfume ,it is a consumption expenditure (C) as measured in GDP . But since it does not represent production in the Canada, therefore , it is also deducted from the GDP as an import. The net effect of the transaction does not change GDP in the Canada.