Question

Which of the following transactions are included in the GDP? a) You buy a new Toyota, made in the United States, paying $25,000. b) You buy a new Toyota, imported from Japan, paying $25,000. c) You buy a used Cadillac from the 1990s, paying $12,000. d) Chrysler manufactures 1,000 automobiles at a cost of $15,000 each. Unable to sell them, the company holds the cars as inventories. e) Mr. Black and Mr. Blue, each out for a Sunday drive, have a collision in which their cars are destroyed. Black and Blue each hire a lawyer to sue the other, paying the lawyers $5,000 each for services rendered. The judge throws the case out of court. f) You sell a used computer you've had for a few years to your friend for $100

Answer 1

Answer:

Options A , D, E are the transactions included in GDP.

Reason: Meaning of GDP: Gross Domestic Product ( GDP) is defined as final value of goods and services which is produced within the geographic boundaries of a country during specific period of time i.e. normally a year and is also important indicator of the economic performance of the country. However, GDP differs from Gross National Product ( GNP), which includes all final goods and services which are produced by resources owned by country's residents, whether located in the country or elsewhere.

Option E, Inventory is considered as transaction in GDP because businesses invest in producing inventory and also it is considered as transaction since new goods that are produced but could not be sold in that particular year in which it was produced.

Option A , is considered as transaction in GDP because when new Toyota is made in United States it adds in health of the country's economy by creating jobs for country's residents who in turn use their wages to purchase local goods and services.

Option D, is also included as transaction in GDP as it comes under services as we are paying fees to the lawyer and is also part of determining GDP using expenditures approach.

Conclusion: Hence according to me, Options A , D, E are the transactions included in GDP.