Comment 34638

By grassroots are the way forward (registered) | Posted October 09, 2009 at 04:56:05

I borrow funds, 1 million

DR Bank 1,000,000 CR Loan payable(long term debt) 1,000,000

So I purchase 1,000,000 worth of vehicles from Japan, since I am a car dealer, thus the entry would be

DR Purchases or inventory 1,000,000 ( either are used in COGS calculation) CR Bank 1,000,000

So A Smith: The amount that is held in inventory or purchases is sold to consumers,a durable good, thus it would be catagorized under C-personal consumption expenditure, that is why as a import it is deducted, as it was not produced in Canada and cannot be included in the calulation.

Jon C is correct, it does not matter where the funding comes from, as GNP is based on EXPENDITURES.

Just because you borrow money, it does not mean that it would be allocated to something that would be produced. What if you if buying stock or ABCP? Do you get my drift? This calcualtion does not consider liabilities or assets, only costs.

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