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The GDP Calculation is for US. If a Canadian company decides to change from a US supplier to a Canadian supplier, will that change the GDP?

I thought it would - as that it would reduce exports - but the answer given is "no change"

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GDP is a measure of the value of final goods produced in a country over a period of time. Final goods are those that are sold to consumers. Therefore, the intermediate step of a supplier selling to another company would not be counted in the GDP calculation. Since it wouldn't have been counted in US GDP when the US supplier was selling to the Canadian company, there is no change in US GDP when the Canadian company changes to a Canadian supplier.

Consider car production across many companies in the US (some make tires, some make engine parts, etc.) that then sell these parts to the final manufacturer. We wouldn't count the production of each part separately, we just count the final value when the car is sold to a consumer.

EDIT: Apparently, I was mistaken. What I said regarding intermediate/final goods is generally true. However, after doing a little more research on this, it turns out exported intermediate goods are an exception to this rule. The value of these exports IS included in the calculation of GDP. For more details on this, see https://research.stlouisfed.org/publications/page1-econ/2018/09/04/how-do-imports-affect-gdp. I apologize for the confusion.

Given this revelation, I am somewhat stumped by your original question. Are there any other details provided in the statement of the question?

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  • $\begingroup$ Thank you, Chris! So, this means exports of intermediate goods are not counted as part of the country's GDP? $\endgroup$ – user585380 Nov 11 '18 at 9:00

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