How would these transactions be counted as part of 2008 U.S. GDP Calculation? •

Question

How would these transactions be counted as part of 2008 U.S. GDP Calculation?
• I purchase a $500 Swiss watch.
• I receive $200 unemployment check from the state government.
• The city of Chicago spends $1 million this year repairing its streets.
• US steel purchases a new $10 million steel rolling machine for its factory.
• Ford Motor Company purchases $10 worth of steel for building fenders.
• I buy a 1998 Ford Escort from a Dealer.
• I buy a plot of land for $100,000.
• I pay a local accountant $175 for her help in filling in my taxes.
• A U.S. travel agent is paid $1000 for services rendered to U.S. customers
while in Tokyo for a year.

Explanation / Answer

How would these transactions be counted as part of 2008 U.S. GDP Calculation?


• I purchase a $500 Swiss watch.
It a consumption, counted in GDP as consumption expenditure

• I receive $200 unemployment check from the state government.
These are transfer payments, not counted in GDP.

• The city of Chicago spends $1 million this year repairing its streets.
Thse is Governmnet spending, counted in GDP

• US steel purchases a new $10 million steel rolling machine for its factory.
This is an investment spending, Counted in GDP as investments


• Ford Motor Company purchases $10 worth of steel for building fenders.
This is a purchase by business firm so included under investment.

• I buy a 1998 Ford Escort from a Dealer.
Resale or repurchases are not counted in GDP

• I buy a plot of land for $100,000.
Land sale and purchase is not included in GDP, since it does not give any output.

• I pay a local accountant $175 for her help in filling in my taxes.
You had paid for a service, its consumption, included in GDP

• A U.S. travel agent is paid $1000 for services rendered to U.S. customers
while in Tokyo for a year. US travel agency operating in forigen soil's out is not considererd as US out put, not counted as out in GDP. But as theservice is brought by the US customer it is considered as import of service. So, this $1000 is counted in GDP, as it is an import we have to deduct $1000 from GDP.

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