Question

Indicate whether each of the following was counted in the United States gross domestic product for the year 1998. Explain each of your answers.

a) The commission earned by a Realtor who sold a house in 1998. The house was originally built in 1955.

b) The value of an automobile produced in 1998, but sold on January 1st, 1999.

c) The $1000 that Kevin earned from a stock that he bought and sold in 1998.

d) The value of blenders produced in 1998 entirely in Germany by a company that is owned by American citizens.

Answer 1

Part 1) The commission earned by a Realtor who sold a house in 1998. The house was originally built in 1955. This will be part of the US gross domestic product (GDP) for the year 1998. This is because, while the house was built in 1955, the commission that the Realtor received was in exchange for the service that was sold in the year 1998.

Part 2) The value of an automobile produced in 1998 but sold on January 1st, 1999. This will not be part of the GDP of the US for the year 1998. This is because, while the automobile was produced in 1998, its actual sale has taken place in 1999. GDP includes the value of final sale.

Part 3) The $1000 that Kevin earned from a stock that he bought and sold in 1998. This will not be part of the GDP of the US. This is because stock market transactions are not include in the national income accounts for the measurement of GDP.

Part 4) The value of blenders produced in 1998 entirely in Germany by a company that is owned by American citizens. This will not be part of the GDP of the US. This is because such a transaction is part of the net factor income from abroad, that is excluded from the gross national income to arrive at the figure of the GDP. GDP is the value of total goods and services produced in a country for a given period of time.