Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: (5 Marks) Banking services bought by a student New cars bought by Hertz, the car rental firm Newsprint bought by the National Post The purchase of a new limo for the prime minister

Item

Final/Intermediate Good

Consumption/Investment/Government Expenditure

Banking services bought by a student

Intermediate service- Banks act as a financial intermediary between savers who deposit money in banks and borrowers who take loans from banks.

Consumption Expenditure since the services are being bought for personal use

New cars bought by Hertz, the car rental firm

Final good - The car is final as a product, that is, it will only be used as a medium for providing rental car services

Investment in business equipment. The cars will generate revenue for the company by offering rental services.

Newsprint bought by the National Post

Intermediate good - The newsprint shall be used for printing daily news by National Post. It is basically a capital good - good used in producing other goods

Investment in business equipment.

The purchase of a new limo for the prime minister.

Final good

Government expenditure- The car shall be used for official purposes by the PM and so the expenses are borne by the government.

New house bought by Alanis Morissette

Final good

Investment - Buying a new house adds to one's existing assets and generates wealth.