Answer to Question #223248 in Macroeconomics for Sonal

Question

Analyze how much Pakistan’s GDP and each of its components is affected by the following transactions? Explain your answers (2 Marks, Maximum 200 words).

Bank Al Habib issues new shares to finance the construction of an office in Sukkur, Sindh.
Sadia spends 50000 on a computer to use in her editing business in Karachi. She got last year’s model on sale for a great price from a local manufacturer.
You mother spend weekend cleaning your apartment.
Your brother pays a shopkeeper to buy a laptop in Karachi

Answer 1

1.

GDP will increase in this case . This is because the financing of the construction of a new office implies a new investment being brought up in the economy which will have a positive impact in the growth of the economy.

2.

GDP will increase. This case implies continuous flow of money between producers and consumers, showing that money supply within the economy is adequate.

3.

GDP is not affected. This is because the activity stated does not contribute to economic growth.

4.

GDP will increase. This is because an economic activity takes place in this case, that is the buying and selling. The shopkeeper offers the laptop at a price. This price is being paid by the buyer. Money is moving from the buyer to the seller. This implies flow of money in the economy which is characterized by adequate money supply and results in continual increase in GDP