Question

For each activity listed below, indicate where the activity would be recorded on the expenditure side of U.S. GDP accounting. Your choices are C, I, G, GX (exports), IM (Imports), and NR (not recorded). Give a brief explanation for each answer; one sentence should suffice a. The federal government pays salaries to federal workers and makes payments to independent contractors who have contracts with the federal government. b. A California resident spends $5 in their favorite Thai restaurant in Berkeley. c. A Berkeley restaurant buys a new dishwashing machine that was manufactured in Mexico. d. A California resident travels to Thailand and spends s5o on a restaurant meal in Bangkok.

Answer 1

A) Federal government spending on salaries and other expneditures comes under the government expenditure which is G.

B) A California resident having spent in Thai restaurant would come under consumption(C) because the expenditure is done in US itself.

C) Buying a machine from outside the geographical boundaries of US would be considered imports and hence the dishwasher would be considered GX ( net exports) ie it would decrease the net exports but would increase the investment(I) because dishwasher would be an investment in machinery.

D) It is NR in gdp because GDP implies counting market value of final goods and services produced in the economy. Here the food is prepared outside the boundaries of US and hence not recorded in GDP.

(You can comment for doubts)