Answer to Question #147089 in Macroeconomics for jane

Question

b. Analyze how much Pakistan’s GDP and each of its components is affected by the following transactions? Explain your answers (2.5 Marks, Maximum 200 words).

i. Toyota Motors issues new shares to finance the construction of an automobile plant in Pakistan.
ii. Your friend wins Rs.2 million in the lottery in Dubai
iii. Rabia spends Rs.1500 to buy her husband dinner at the finest restaurant in Karachi
iv. General Motors builds Rs.40 million worth of cars, but consumers only buy Rs. 38 million worth of them.

Answer 1

i. If Toyota Motors issues new shares to finance the construction of an automobile plant in Pakistan, then the investment will increase, so GDP will increase.

ii. If your friend wins Rs.2 million in the lottery in Dubai, then the consumption will increase, so GDP will increase.

iii. If Rabia spends Rs.1500 to buy her husband dinner at the finest restaurant in Karachi, then the consumption will increase, so GDP will increase.

iv. If General Motors builds Rs.40 million worth of cars, but consumers only buy Rs. 38 million worth of them, then the consumption will decrease, so GDP will decrease.