Question

I bought a new car recently -- a Kia Forte. Kia, of course, is a South Korean company. The price sticker says 2% of the parts in my car were made in the US or Canada, 55% were made in Mexico, and 43% were made in Korea. Final assembly of the vehicle was in Mexico. I bought it at a dealership here in Phoenix. So which country gets GDP credit for this car? Why?

Answer 1

The gross domestic product (GDP) includes the production of final goods and services with in the domestic territory of a country during a year's time.

The price sticker of the car states that 2% of the parts of the car were made in US or Canada, 55% were made in Mexico, and 43% were made in Korea.

The parts of car are intermediate goods that are used to made the final product (car).

Intermediate goods are not included in GDP.

So, countries manufacturing parts are just making the intermediate goods and not the final good and thus would not get the GDP credit for this car.

This car is bought at a dealership in Phoenix. This implies that this car is imported in to the US and is not produced in US.

So, it will not be included in GDP of US.

The GDP credit for this car will go to that country where the car was assembled and a final product has been produced.

It is provided that final assembly of the car was done in Mexico.

So, this car is produced in the Mexico.

Thus,

Mexico would get the GDP credit for this car.