Question

Which of the following transactions are counted in GDP?Select one or more answers from the choices shown.

a. Kerry buys a new sweater to wear this winter.

b. Patricia receives a Social Security check.

c. Roberto gives his daughter \(50 for her birthday.

d. Nayana sells \)1,000 of General Electric stock.

e. Jasmine buys a new car.

f. Molly buys a used car

Short answer

The following will be counted in while calculating the GDP:

a. Kerry buys a new sweater to wear this winter.

e. Jasmine buys a new car.

Step-by-step solution

Explanation for inclusion of part (a)

GDP includes the estimation of the value of all the final goods and services produced in a country or the income earned by the sale of such goods and services.

When Kerry buys a new sweater, she is spending on the final good. This is the household consumption expenditure, and therefore, is included in GDP.

Explanation for exclusion of part (b)

Non-production transactions like transfer payments, second-hand sales are not included in the GDP calculations as these monetary transactions do not result in final good generation.

Social Security Check received by Patricia is a public transfer payment that does not involve any addition to current production and thus, is excluded to avoid overstating the national income.

Explanation for exclusion of part (c)

The $50 received by Roberto’s daughter is a private transfer payment that results in no change in the nation’s output, and therefore, is excluded from GDP calculations.

Explanation for exclusion of part (d)

The selling of $1000 General electric Stock by Nayana is not included as it is a stock market transaction that adds nothing to current production and is just swapping of papers.

Explanation for inclusion of part (e)

When Jasmine buys a new car, she is spending on the final good, and thus, the transaction is counted in GDP calculations.

Explanation for exclusion of part (f)

Molly buying a used car is not included as the value of the car was already included in the year in which it was originally produced. There is no addition to the current output level, and hence, this is excluded from GDP calculations.