To which component of the US GDP expenditure does each of the following belong to? (C,...

To which component of the US GDP expenditure does each of the following belong to? (C, I, G, NX, or none of the four)

(a) gambling services provided to tourists by Las Vegas casinos

b) a new tractor purchased by a farmer

(d) a machine made in the US and sold to Japan.

e) the purchase of a lottery ticket.

(f) a new car made in the US but not yet sold

(g) commission paid to E-Trade because they provided stock trading services

(h) the salary of the chief of police

Solutions

Expert Solution

A: This will belong to the CONSUMPTION (C) part of the US GDP. Becasue the tourists are consuming U.S services.

B: This will belong to the Private INVESTMENT (I) part of the US GDP. Because the tractor can be used over the years to produce other goods.

C: None of the four. Because it is a second hand good and second hand goods are not included in the GDP because it is already counted as part of the consumption in the year it is produeced. Counting it again will result in DOUBLE COUNTING.

D: This will belong to the NET EXPORTS (NX) part of the US GDP. Becasue it is an export from US to JAPAN.

E: This will belong to the CONSUMPTION(C) part of the US GDP. Because the person is consuming the good that is lottery. it is important to remember that winning a lottery will not be included in GDP becasue it does not create any value in the economy.

F: A new car made in the US but not yet sold is not included in any of the above given options.

G: This will belong to the CONSUMPTION(C) part of the US GDP. Because the person is consuming stock trading services and is paying the price for it.

H: This is included in the GOVERNMNET SPENDING(G) part of the economy. All the salaries to the government employees are part of G.

Rahul Sunny answered 1 year ago

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