All About GDP

Part B You buy a new Toyota that was made in Japan.

Net Exports

Part C Why won't a purely financial transaction be counted in the GDP?

No goods or services are being exchanged in a financial transaction.

Part B A family pays a contractor $100,000 for a house he built for them this year.

Consumption

Part B An accountant pays a tailor $175 to sew a suit for him.

Consumption

Part B You pay $300 a month to rent an apartment.

Consumption

Part B You pay tuition to attend college.

Consumption

Part B You spend $7.00 to attend a movie.

Consumption

Part B A family pays $75,000 for a house built three years ago.

Not Counted (It was built and counted three years ago)

Part B The government makes a $300 Social Security payment to a retired person.

Not Counted (No good or service is provided)

Part B R.J. Reynolds Co. buys control of Nabisco.

Not Counted (financial transactions are not counted)

Part A A plumber's purchase of a two year old used truck.

Not Included -It was already counted when it was produced and purchased the first time, therefore it does not need to be counted a second time.

Part A Cashing a U.S. Government bond.

Not Included -Often does not get a good or service in exchange, therefore it is not counted.

Part A Income received from the sale of a Nike stock.

Not Included -The selling of stocks is never counted in the GDP.

Part B You buy a General Motors Corp. stock for $1,000 in the stock market.

Not counted (Stocks are not counted in the GDP)

Part B A homemaker works hard caring for her spouse and two children.

Not counted (She is not payed for doing so)

Part B The Government increases its defense and expenditures by $1,000,000,000.

Government

Part C When a home owner does home improvement work, why isn't the value of the labor counted in the GDP?

There is no market transaction; the home owner is not paid to do home improvement work on his own home.

Part C Why do we count the final retail price of a new good or service in the GDP?

If we were to count the intermediate price in the GDP, we would be counting a good or service twice, or in other words "Double Counting".

Part A A barber's income from cutting hair

Included -A service is made from the barber's career, so it is counted.

Part A The government's purchase of a new submarine for the navy.

Included -Service from the Navy is then produced, so this is included in the GDP.

Part A A farmer's purchase of a new tractor.

Included -The tractor was once produced and then purchased by the farmer.

Part B Apple Computer Co. builds a new factory in the United States.

Investment

Part B At the end of a year, a flour milling firm finds that its inventories of grain and flour are $10,000 above the amount of inventories at the beginning of the year.

Investment

Part B Ford Motor Co. buys new auto-making robots.

Investment