Question

What is in the GDP?

Busy Moms pay $20.00 to buy the new best seller, "How to feed Your teenager Junk Food."

		counted as consumption (C)
		Counted as I (investment)
		Not Counted since it is bad advice
		counted as G (government spending)

Your dad's store sells $5,000 of plate glass for housing construction

		counted as I (investment)
		Not counted (intermediate good)
		counted as Investment business inventory
		not counted, not a market activity

Cover-Up cosmetics has an unsold inventory of $30,000

		Not counted, intermediate goods
		not counted, not a market acivity
		counted as Investment
		counted as Consumption, since not used yet.

PepsiCo donates $20,000 to your soccer team

		counted as a tax deductable item in GDP
		counted as consumption
		counted as Investment
		not counted, not a market activity

McDonalds buys a new fryer cooker for $1500

		counted as Investment
		counted as consumption, since it will be used in a consumer product
		not counted, intermediate product
		counted as transfer payment to McDonalds

You buy three shares of Google for $3,000

		counted as Investment
		not counted
		counted as consumption
		counted as transfer payment

You buy a brand new Kia car from a dealer in New Jersey for $15,000; the car was produced in South Korea

		added to GDP as an import
		not counted in the GDP
		counted as a consumer good
		counted as an international transfer

You get your hair cut at a barber shop for $100.

		counted as consumption (C)
		counted as a 'Service' in the Consumption category
		counted as an investment since you look so good
		both answers a and b are correct

A Japanese company buys 50 computers for their cloud services

		not counted since computers are being used abroad
		counted as business inventory
		counted as an export
		not counted

John buys a "hot" (i.e. stolen) $500 car stereo for $50

		only $50 will be counted in GDP since that is what you paid for it
		$500 will be counted towards GDP, since that is the real price
		not counted, illegal activity
		only $450 will be counted.

Answer 1

a) Option A Counted as Consumption

This is included in GDP as Consumption Expenditure. The mom has bought the book for personal use ie for reading it and gaining some knowledge.Final consumption expenditure is the term used for the component of GDP or gross domestic product that refers to all of the money that Americans spend on goods and services intended to meet individual needs.

b) Option B Not counted as intermediate good

Sale of plate glass worth $5000 is not included in GDP as it is an intermediate good. Intermediate goods are goods that are not sold to final customer.

c) Option C counted as Investment.

Unsold output goes into inventory and is counted as inventory investment for the purpose of calculation of GDP.

d) Option D not counted not a market activity.

Because GDP measures the market value of newly produced goods and services. When PepsiCo donates $20000 to Soccer team, this is not a good or a service. So it is not counted. GDP is not a measure of utils or welfare or whatever.