Activity #7, Macro 1. Which of the following are included in this years GDP. Sta

Question

Activity #7, Macro 1. Which of the following are included in this years GDP. State whether it is the income or the expenditure side of GDP. Explain your answer in each case. a) interest on an AT&T; bond b) Social security payments received by a retired factory worker c) The services of a painter in painting the family home. d) The income of a dentist e) The money received by Smith when she sells her economics textbook to a book buyer 1) The monthly allowance a college student receives from home g) Rent received on a two-bedroom apartment h) The money received by Mac when he resells his current year-model Plymouth Prowler to Stan i) Interest received on corporate bonds. j) a 2-hour decrease in the length of the work week. k) The purchase of an AT&Tbond; I. A S2 billion increase in business inventories m. The purchase of 100 shares of GM common stock n. The purchase of a new car o) The purchase of an insurance policy

Explanation / Answer

1. a) Included in year's GDP and it is income.

b) Not included

c) Not included because service is not provided to other for which person received some money.

d) Included because GDP includes income from goods and services.

e) Not included because book is firstly sold by shopkeeper to Smith and then Smith again sold it to shopkeeper.

f) Not included

g) Included and it is income of country.

h) Not included as resale of good is not included while calculating GDP of a country.

i) Included in income method

j) Not included because change in work week itself is not production of final good or service.

k) Not included because it is just transfer of ownership of financial assets.

l) Included because increase in inventories means increase in production.

m) Not included because it is transfer of ownership of financial assets.

n) Included because it is consumption expenditure.

o) Included because insurance is a final service.

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