Question

analyze each of the following activies and explain if they would be counted in the GDP, and why or why not?

a) deterioration of water quality in the atlantic ocean.

b) the purchase of a new automobile.

c) services provided free of charge by a homemaker.

d) the production of sale of illegal drugs.

e) the purchase of 100 shares of american airline stocks.

f) the installation of airbags in every automobile.

Answer 1

a.

Ans: No.

Explanation: It is not production activity. GDP measures only market value of goods and services produced in a country in a year.

b.

Ans: Yes.

Explanation: It is expenditure on newly produced automobile getting sold for the first time. It gets reflected in private final consumption in expenditure method.

c.

Ans: No.

Explanation: It is neither charged nor a commercial activity or service.

d.

Ans: No.

Explanation: Illegal activities are not counted in measurement of GDP, only legal ones are reflected.

e.

Ans: No.

Explanation: This is not backed by any production or sale of service. Financial investments are not counted in GDP.

f.

Ans: Yes.

Explanation: Airbags are final produced goods and expenditure on them in counted in GDP in expenditure method.

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