Stephanie buys a designer dress produced by a Canadian-owned fashion shop in France.As a result,Canadian consumption increases.What happens as a result?

Question

Quizplus · Accepted Answer

When Stephanie buys a designer dress produced by a Canadian-owned fashion shop in France, Canadian consumption increases as it contributes to the expenditure component of Canadian GDP. However, as the dress is produced in France, it contributes to their net exports, which decreases Canadian net exports. Nevertheless, the increase in Canadian consumption leads to an increase in Canadian GNP (Gross National Product) as it includes production by Canadians whether it occurs domestically or abroad. Therefore, the correct choice is C - Canadian net exports decrease, Canadian GDP is unaffected, and Canadian GNP increases. French GDP is not affected by Canadian consumption or net exports of Canadian-owned fashion shops in France.

Stephanie Buys a Designer Dress Produced by a Canadian-Owned Fashion