Question

Are the following items included in GDP? If they are not, briefly (1 sentence) explain why they are not.

1. Delta sells one of its existing airplanes to Korean air.
2. A California winery produces a bottle of Chardonnay and sells it to a customer in Montreal, Canada
3. An American buys a bottle of French perfume.
4. A college student buys pizza for dinner.

	Bagels		DVDs		Pizza
Year	Price	Q	Price	Q	Price	Q
2002	10	900	10	100	15	2
2003	10.5	1000	12	105	16	2
2004	12	1050	14	110	17	3

1. Nominal GDP in 2003                ________________
2. Nominal GDP in 2004                ________________
3. Real GDP in 2003                      ________________
4. Real GDP 2004                          ________________

Answer 1

1.

• GDP is the final production value of goods and services in an economy over a given within the domestic boundary of a country
• It includes only final value of goods and services
• By expenditure method it is the sum of consumption, investment, government spending and net export
• where net export is the difference of export and import

1. As it is already described that GDP only includes final goods and services but here in the delta the existing airplane is sold so it will not be counted in GDP
2. Incase of California that produces bottles of Chardonnay but sales in Canada so it will be counted under GDP because here California export the bottle to Canada
3. when American buys bottle of French perfume then it will come under the GDP because the perfume will come under the import category
4. when a college student buys pizza for dinner then it will come under the consumption and it will be counted under GDP as well

Answer - 2nd,3rd and 4th are included in GDP

1st- not included

2.