question archive Which component of GDP will be affected by each of the following transactions involving the Ford Motor Company? If you believe that none of the components of GDP will be affected by the transactions, briefly explain why
Which component of GDP will be affected by each of the following transactions involving the Ford Motor Company? If you believe that none of the components of GDP will be affected by the transactions, briefly explain why
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Which component of GDP will be affected by each of the following transactions involving the Ford Motor Company? If you believe that none of the components of GDP will be affected by the transactions, briefly explain why.
a) You purchase a new Ford Escape Hybrid from a Ford dealer.
b) You purchase a 2008 Ford Escape Hybrid from a friend
c) Ford purchases door handles to be installed on the doors of new Escapes from an auto parts manufacturer in Indiana
d) Ford purchases 1,000 Escapes in a factory in Missouri and ships them to a car dealer in Shanghai, China.
e) Ford purchases new machine tools to use in its Missouri Escape factory
f) The state of Missouri builds a new highway to help improve access to the Ford Escape plant
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Answer:
Component of the GDP includes Consumption, Investment, Government expenditure and Net Exports.
a) Ford purchase will affect the "Consumption".
b) It will not affect any component of the GDP because it has already affected the GDP when it was purchased once. IF the car is resold or change hands it will not have any effect on the GDP.
c) IT will not have any effect on the GDP. THe goods purchased by the Ford will be used in the finished good and the door handle will be part of the car. When the car is sold it will be recorded but not the intermediate goods like door handle or tires.
d) Net Export will be affected. Ford is exporting car to China.
e) The investment will be affected. Ford is investing in new plants which will increase his production in the future.
f) Government expenditure will be affected.
