1. Classify each of the following items as included or not included in GDP. Give an...

1. Classify each of the following items as included or not included in GDP. Give an explanation for those that you judge as not included. State when applicable, the expenditure category in which each good is included.

a. The purchase of copy paper by PepsiCo, which is used by the company staff.

b. The purchase of an electronic handheld organizer by a sales manager to keep track of clients.

c. The purchase of a new helicopter by the Canadian military.

d. An increase in Compaq Computers’ inventory of unsold personal computers.

e. A deposit in your savings account as a result of a judgment in a lawsuit.

f. The sale of a used computer.

g. Your donation of a used computer to a local elementary school.

h. The purchase by a German resident in Germany of a ceiling fan produced in Canada.

Solutions

Expert Solution

a. The purchase of copy paper by PepsiCo, which is used by the company staff. This is not included in GDP because this is an intermediate good which will be used for production of a final good.

b. The purchase of an electronic handheld organizer by a sales manager to keep track of clients.It is included in GDP and is an investment.

c. The purchase of a new helicopter by the Canadian military.It is included in GDP under the head government expenditure.

d. An increase in Compaq Computers’ inventory of unsold personal computers.It is included as it is unsold inventory and is included in investments.

e. A deposit in your savings account as a result of a judgment in a lawsuit. It is not included as it is not a production of goods and services .

f. The sale of a used computer. It is not included as it is a second hand sale and it could have been taken into account in the year of production.

g. Your donation of a used computer to a local elementary school. It is not included because it is not production of goods and services.

h. The purchase by a German resident in Germany of a ceiling fan produced in Canada.

Rahul Sunny answered 1 year ago

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