Consider the following transactions that take place in 2021. A rancher in Alberta takes $100 worth of inputs to produce animal skin, which she sells to a tanner in Ontario for $700. The tanner produces leather and sells it to a shoemaker in Portugal for $1200. The shoemaker in Portugal produces shoes and sells it to a boutique owner in British Columbia for $2000. The boutique owner in British Columbia sells the shoes for $4000 to its customers. a. What is the change in Canadian GDP as a result of these transactions? For each transaction, explain why it is included or excluded from Canadian GDP. b. Show that the value-added approach and the expenditure approach lead to the same GDP contribution. c. Using this example, explain why GDP is also a measure of a country’s income.
Consider the following transactions that take place in 2021. A rancher in Alberta takes $100 worth of inputs to produce animal skin, which she sells to a tanner in Ontario for $700. The tanner produces leather and sells it to a shoemaker in Portugal for $1200. The shoemaker in Portugal produces shoes and sells it to a boutique owner in British Columbia for $2000. The boutique owner in British Columbia sells the shoes for $4000 to its customers.
a. What is the change in Canadian
b. Show that the value-added approach and the expenditure approach lead to the same GDP contribution.
c. Using this example, explain why GDP is also a measure of a country’s income.
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