Question

4. Which of the following are included in GDP, and which are not? Write in paragraph form. Provide examples and explain your answer.
   1. The rise in life expectancy over time
   2. Child care provided by a licensed day care center
   3. Child care provided by a grandmother
   4. The sale of a used car
   5. The sale of a new car
   6. The iron that goes into the steel that goes into a refrigerator bought by a consumer.

Answer 1

GDP refers to all the finished goods and services produced within a country during a specific period.It takes into consideration consumption expenditures, investment activities, government expenditure and net exports.

GDP=C+I+G+NX

a.Rise in life expectancy is not a market specific transaction hence not calculated in GDP but given precedence in calculating HDI.

b.Child care provided by a day care is definetly part of the GDP as the day care is paid for the service provided which accounts as a market transaction

c.Child care provided by grandmother would only be accounted in GDP if the grandmother is paid for doing so and she reports it as her income  

d. Sale of used car is not produced in that specific period hence would not be accounted in the GDP

e.Sale of new car is accounted in GDP as its a finished good produced in the specified period

f.The iron will not be accounted for as  GDP includes only finished goods whereas iron is an intermediate good .