Question

Q1. What components of Canadian GDP (if any) would each of the following transactions affect? Explain briefly. i. A monthly scholarship cheque received by an Economics student at BCIT i. Goods sold out of last year's inventories ii. BC spends $10M repaving Highway 91 iv. Amanda Labaamba buys a life insurance policy worth $20M v. A Chiliwack corn farmer buys an almost new tractor

Answer 1

Q1.

i. It is excluded from government purchases in GDP accounting as nothing is being produced in return for the payment

ii. As the goods produced last year are included in inventories of last year and hence recorded in last year GDP and not in the current year GDP

iii. Government purchases increases because the government spent money to provide a good to the public

iv. It increases investment as relatively little premiums are paid for a larger cover

v. Not included in GDP as only newly produced goods are included in GDP