Determine whether or not each of the following activities is included in GDP. If you say...

Determine whether or not each of the following activities is included in GDP. If you say “included”, identify which expd. component of GDP it would fall under. If you say “not included”, explain why not.

The government sends out social-security checks to some households.

In the spring, some people repaint their own homes.

Traders in financial markets trade millions of dollars’ worth of stocks & bonds.

Financial brokers earn millions of dollars of fees every year.

Solutions

Expert Solution

a) The government sends out social security checks to some households: The given transaction will not be included in the GDP because the GDP doesn't include transfer payments. All the social security are apart of transfer payments i.e. nothing is given back in return for social security.

b) People painting their own house will be an unpaid work which will not be included in the GDP. If the same work is done by some person hired and paid for the same work then it will be included in the GDP but unpaid works like household chores and doing unpaid works is not included in the GDP.

c) Stocks are not included in the GDP. GD include the things which result in some value addition or is related to something new created. A stock is just equity changing hands and not new creating or value addition.

d) Yes, the fee of the financial brokers is included in the GDP. The fees received by the financial broker are the part of income earned by them in exchange for their services.

Rahul Sunny answered 1 year ago

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