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QUESTION 5 A Japanese consultancy firm operating in New York hires an American worker. They pay him $30,000 in wages. The new worker's contribution is to bring a new client to the firm that buys consulting services for $40,000 (you may assume no other new cost was involved in this other than the wage). The client is a Canadian firm located in Toronto. Which of the following is correct? National income increases by $30,000 and factor payments to abroad increase by $10,000, so US GDP increases by $40,000 Consumption increases by $30,000 and exports increase by $10,000,so US GDP increases by $40,000 Consumption increases by $40,000 and imports increase by $40,000 so US GDP remains unchanged National income increases by $30,000 and factor payments from abroad increase by $30,000, so US GDP remains unchanged

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Answer

The best possible option is (A)

As Japan Consultancy hired American Worker and pays him $30000, hence NI increases by $30000.

Hence we left with first and last option.

Now, As Torronto hired service from consultancy worth $40000. This implies NFIA is $10000.

Hence GDP increases by $40000.

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