Question

Which of the following are included in GDP, and which are not?

a. The cost of hospital stays

b. The rise in life expectancy over time

c. Child care provided by a licensed day care center

d. Child care provided by a grandmother

e. A used car sale

f. A new car sale

g. The greater variety of cheese available in supermarkets

h. The iron that goes into the steel that goes into a refrigerator bought by a consumer.

Short answer

All final goods and services are included in GDP, but not the value of intermediate goods. The value of intermediate goods is not included in GDP. Intermediate goods are used as raw materials for the production of final goods, the value of which is already included.

Step-by-step solution

Step 1. GDP

Gross Domestic Product (GDP) is the standard measure of the value-added value created through the production of goods and services in a country during a given period.

Step 2. Description

a. Hospital stay is part of GDP.

b. Changes in life expectancy are not market transactions and are not part of GDP.

c. Child care for which it is paid is part of GDP.

d. If grandma receives payment and reports it as income, it is part of GDP, otherwise not.

i. This year the used car is not produced, so it is not part of GDP.

f. New car is part of GDP.

g. Yes. Variety doesn't count in GDP, where the cheese could be all cheddar.

h. Iron is not counted because it is an intermediate commodity.