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.
v. 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.
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Following is the analysis of the effect of given transactions on Pakistan's GDP:
Explanation:
- i. If Toyota Motors were to issue new shares to fund the building of an automobile plant in Pakistan, then the investments will increase, so will the GDP.
- ii. If a friend wins Rs.2 million in the lottery in Dubai, then there would be no impact on the GDP as this transaction is not concerned with the country.
- iii. If Rabia is to spend Rs.1500 to buy her husband dinner at the best restaurant in Karachi, then the consumption will increase by Rs. 1500 and so GDP will also increase.
- iv. If General Motors is to build Rs.40 million worth of cars, but consumers only purchase Rs. 38 million worth of them, then the consumption will increase by Rs. 38 million, inventory investment rises by Rs. 2 million and GDP will increase by Rs. 40 million.
- v. If Sadia spent Rs. 50000 on a previous year’s model of computer, then the current investments and GDP do not change, because the computer was manufactured last year.
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