Question

Which of the following is counted in this year’s GDP explain your answer in each case?

Interest received on an AT&T corporate bond.

• Social Security payments received by a retired factory worker.

• Unpaid services of a family member in painting the family home

• Income of a dentist from the dental services provide.

• A monthly allowance a college student receives from home.

• Money received by Josh when he resells his nearly brand-new Honda automobile to Kim.

• The publication and sale of a new college textbook.   

• An increase in leisure resulting from a 2-hour decrease in the length of the workweek, with no reduction in pay.

• A $2 billion increase in business inventories.

• The purchase of 100 shares of Google common stock.

Answer 1

1) Solution: Included.

Explanation: Interest income received for the corporate bond by the bond holder for the services derived by the corporation for it's loan will be included.

2) Solution: Excluded.

Explanation: A transfer payment renders no service thus will be excluded.

3) Solution: Excluded.

Explanation: It is excluded because it is a non-market production.

4) Solution: Included.

Explanation: Payment for a final service from the dentist will be included

5) Solution: Excluded.

Explanation: A monthly allowance to a college student from his home is a private transfer payment; and merely transfer of income from one person to another when no transaction in the market occurs will not be counted

6) Solution: Excluded.

Explanation: It's excluded because production of the car had already been counted at the initial sale time.

7) Solution: Included.

Explanation: Because it is a new product produced for final consumption thus will be counted

8) Solution: Excluded.

Explanation: The effect of the reduction will be considered and counted, however the change in the workweek itself is not for producing the final item/ service or a payment for work done.

9) Solution: Included.

Explanation: The rise in inventories could only occur as a result of rise in the production.

10) Solution: Excluded.

Explanation: The purchase for shares of Google common stock is merely ownership transfer of existing financial assets