1. Calculate the contribution, say how much will be added or not to GDP that wou

Question

1. Calculate the contribution, say how much will be added or not to GDP that would be the result of each of the following transactions.

(a) The government purchases an airplane for $6 million.
(b) A citizen sells a used car for $6,000.
(c) A citizen sells a used car to a dealer for $6,000, who resells it to a consumer for $7,500.
(d) A citizen sells a bond for $1,000 that they bought last year for $600.
(e) The government issues a social security check for $1,250 (ignore the administrative costs of issuing the check).

Explanation / Answer

GDP is the value of all goods and services produced. Investments and savings plans don't count. Think about it - if you put money into an account and then take it out, or if you sell something you already own to your neightbor who sells it back to you for the same price right away, does that add anything to the economy? No. So E is definitely nothing, and A is definitely 6 million. The other ones are harder and I'll leave those up to you.

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