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Q5: (a) Suppose that in Year 1 a firm produces 5 cars valued at $10,000 each. It has contributed $50,000 to GDP. In Year 2 its contribution is $60,000. Has the firm produced more cars? Why eliminating price changes allows us to see more clearly whether or not there have been output changes. Q5: (B) Assume a car dealer in Pakistan imported 20 cars directly from Japan at a cost of Rs.500,000 per car in 2005. By close of year 2005, 15 cars were sold at Rs.600,000 per car. The remaining 5 cars were sold in 2006 for Rs.550,000 each. How are the GNP and its major components affected in 2005 and in 2006 through this transaction? Expert's answer
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