Question

Gross Domestic Product Assignment : For each of the following scenarios determine whether or not it should be included in the U.S. GDP calculation. How much would each situation increase GDP by (you should be able to give me an exact number)? If a transaction does not count towards GDP give me an explanation on the definition requirement it does not satisfy and why. Unless otherwise stated, assume that all transactions are completed domestically, within a one year time period. Answer the remaining questions thoroughly, making sure to completely label any graphs used. Each portion of an explanation should be a minimum of 5-6 sentences each.

a. You purchase a used economics textbook from the RCC bookstore this semester for $50.

b. You win $450 while gambling in Las Vegas.

c. The Detroit Tigers purchase an additional $4.7 million worth of Labatt Blue (manufactured and bottled in Toronto) to sell during this year’s Spring Training.

d. You buy a new Mercedes Benz (German produced automobile) from a Champaign, Illinois dealership for $55,000.

f. You volunteer at a retirement home, baking for senior citizens. You buy $100 worth of materials to use.

Answer 1

a) Purchase of a used economics textbook from the RCC bookstore this semester for $50 is a type of personal consuption expediture in order to fulfill demand of a text book for this semester. But it doesn't include in the calculation of national income as its a used product and under national income calculation (expenditure method) only newly produced goods can be included.like: those product which are buying first time in the economy and after buying them something is goinig to add in the economy where as used product do not serve this objective.

b)  You win $450 while gambling in Las Vegas excluded from the national income accounting as its a private transfer payment and doesn't make value addition in the economy it is mearly a money transfer from one person to another without making any economic activity like production, consuption, investment or exchange.

c) The purchase an additional $4.7 million worth of Labatt Blue (manufactured and bottled in Toronto) to sell during this year’s Spring Training by "The Detroit Tigers" is included in the national income calculation and considered as private consumption of non durable goods which made in order to fulfil current demand of the community.  

d) buying of a new Mercedes Benz (German produced automobile) from a Champaign, Illinois dealership for $55,000. is included in the national income calculation under expenditure method of income calculation as a private consumption expenditure on durable goods in order to ful fill demand.

f) $100 worth of materials to use for baking at a retirement home for senior citizens. included in the national income calculation as its buying of goods from a privat supplier and in return buyer pays for it, and it is totally irrelevant that it was purchase for baking for senior citizen in the retirement home.