Question

Suppose that Nissan produced 1,000 new XTerra sport utility vehicles at its factory in Tennessee in December 2015. In January 2016, these vehicles were transported to dealers and were later sold to customers. Which of the following statements are true?

• A. Because the vehicles were produced in 2015, their value should be included in real GDP for 2015.

• B. Because the vehicles were not purchased until 2016, their value should not be included in real GDP for 2015.

• C. Under the expenditure approach, these vehicles should be included as expenditure on investment in 2015.

• D. Under the expenditure approach, these vehicles should be included in net exports for 2016 because Nissan is headquartered in Japan.

• E. Both (a) and (c) are true.

• F. Both (b) and (d) are true

• G. None of the above statements are true.

Answer 1

GDP refers to the total value of output produced in an economy during a given year. It implies that a good which is produce in a given year then it should include in the GDP in the same year itself.

Here Nissan produce cars in 2015 so it should be included in GDP in year 2015 irrespective of its year of sale. So the year of purchase does not matter. So option A is correct and option B is incorrect.

In expenditure method, all the expenditure within the economy is added to calculate GDP. If the product sell in 2015 itself then it will included in expenditure method as private final consumption expenditure but here cars were not sold in the same year so the expenditure to produce that is investment expenditure should be included in GDP. So option c is also correct.

Also the goods which are produced within the geographical boundary of a country irrespective the home country of a company the value of good should be included in GDP. Here exports and imports are not included so option D is wrong.

So it can be concluded that

E. Both (a) and (c) are true.