Question

Which of the following would be included in the GDP? Explain why or why not in each case. The explanation matters a great deal.

a. Paving your own driveway, yourself: Answer:

b. Buying an old lawnmower from the Goodwill: Answer:

c. The disappearance of certain bird species: Answer:

d. MIT adds new research to its table: Answer:

e. Earning a commission on selling refurbished cellphones: Answer:

f. 1.9% interest earned on a CD: Answer:

g. AT&T pays dividends: Answer:

h. Buying cannabis from an unlicensed grower and distributor. Someone off the grid: Answer:

i. Withdrawing money from your savings account: Answer:

Answer 1

The GDP can be defined the market value of all goods and services which are produced in the domestic territory of the country in the current financial years.

GDP by expenditure method=C+I+G+X-M

GDP at MP by income method= wages and salaries+ rent+ interest+ Corporate profit+ Proprietor income+ Depreciation+ indirect business tax

a. Paving your own driveway, yourself:

This will not be included in the GDP because this work is done by individual itself and implicit work is not included in the GDP because for this no payment is done.

b. Buying an old lawnmower from the Goodwill:

Old used goods purchase will not be included in the GDP because it was included in the GDP when it was manufactured.

c. The disappearance of certain bird species:

Since disappearance of certain bird species are neither part of production nor expenditure. Hence it will not be included in the GDP.

d. MIT adds new research to its table:

Since MIT adds new research to its table, so there production of new knowledge, so it will be included in the GDP.

e. Earning a commission on selling refurbished cellphones:

Answer: Since commission of selling refurbished cellphones are part of reward of services done in the current year. Hence it will be included in the GDP.

f.

f. 1.9% interest earned on a CD:

Answer: Since 1.9% interest is earned on the CD in the current year, so it will be included in the GDP because interest is added in GDP by income method.

g. AT&T pays dividends:

Answer: Since Dividends are part of GDP while calculating by income method. Hence it will be included in the GDP.

h. Buying cannabis from an unlicensed grower and distributor. Someone off the grid: Answer: Since there are purchase of cannabis from an unlicensed grower and distributor, so it will not come into the picture officially, so it will hided. Hence it will not be included in the GDP.

i. Withdrawing money from your savings account:

Answer: Since with the withdrawal of money from the saving account does not produce any income. Hence it will not be included in the GDP.