1.The local Land Rover dealership has an increase in inventory of 10 SUVs in 2019. How will the sale of all 10 SUVs in 2020 affect the GDP?

a.The value of the cars will be counted as part of GDP in 2019 but not in 2020.

b.The value of the cars will not affect the 2019 GDP, but will be included in 2020 GDP.

c.The value of the cars will be included in both 2019 and 2020 GDP.

d.The value of the cars will not be included in GDP in 2019 or 2020.

2.Larissa buys and lives in a newly constructed home she paid $400,000 for in 2019. She sells the house in 2020 for $450,000. How is GDP impacted?

a.The 2020 sale increases 2020 GDP by $450,000 and does nothing to 2019 GDP.

b.The 2020 sale increases 2020 GDP by $50,000 and does nothing to 2019 GDP.

c.The 2020 sale does not increase 2020 GDP and does nothing to 2019 GDP.

d.The 2020 sale increases 2020 GDP by $450,000, and 2019 GDP is revised upward by $50,000.

3.A wind farm in Manitoba buys a large turbine generator from a Swedish-owned factory located in Ontario and using local workers. What happens as a result?

a.Canadian government spending and GDP increase by the same amount.

b.Canadian investment increases but GDP is unaffected.

c.Canadian investment and GDP increase by the same amount.

d.Canadian investment increases, but Canadian GDP increases by a smaller amount.

Exercise 1 (4 points)

Ryan is a Canadian resident who lives with his family in Victoria, Canada, but works for a small donut cafe in Seattle, U.S., where he commutes every day. On a typical day, Ryan produces 400 donuts that sell for $1 apiece. Of the revenue from selling the donuts, Ryan is paid $200 per day. The remaining $200 revenue is distributed as follows: $50 pays for inputs such as water, flour, sugar, butter, and energy, $100 is rent for using the facilities and interest for an initial loan to start the business, and $50 goes to salary to the manager and profit to the owner of the caf.

a) How much is the increase in U.S. and Canada GDP generated by the production of the 400 donuts?

b) How much is Ryan's contribution to the creation of the $400 value of donuts? Explain.

c) Since Ryan takes his income home to Canada, should the U.S. allow foreign workers such as Ryan to take jobs that might otherwise go to American workers? Explain.