Question

If a Canadian citizen buys a smart phone made in China by a Chinese firm, what...

If a Canadian citizen buys a smart phone made in China by a Chinese firm, what is the impact on net exports and GDP?

a. Canadian net exports decrease, but Canadian GDP is unaffected. b. Canadian net exports and Canadian GDP decrease. c. Canadian net exports are unaffected, but Canadian GDP decreases. d. Canadian net exports and Canadian GDP are unaffected.

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Homework Answers

Answer #1

GDP which is Gross domestic Product in simple terms is the production value of final goods and services within the domestic boundary of a country in a financial year

It is generally measured quarterly or yearly basis

By expenditure method, it has 4 main components

GDP is the sum of consumption, investment, government spending and net export

Where net export is the difference of export and import

Now from the given question, since the Canadian citizen buy this smartphone that is made in China it means it has imported that smartphone

So in this case the GDP will decrease but the Canada has not exported any of the good so export will remain unaffected

The correct answer here is option C

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