At the beginning of the year, Bob buys a new truck that costs $12000.00. Bob dec
ID: 1091992 • Letter: A
Question
At the beginning of the year, Bob buys a new truck that costs $12000.00. Bob decides his truck doesn't suit his lifestyle, so he sells his truck for $6000.00 the following day. Bob then buys a used car for $4000.00 the same day, and invests the remaining $2000.00 in bonds. Suppose Bob sells his bonds the last day of the year for a 25% return. Note that, because of Bob's connections, his broker charges him no fees. Bob then spends the entirety of his investment capital and returns on a new watch. How much did Bob's actions contribute to GDP that year (rounded to the nearest ten)?
Explanation / Answer
Only final goods purchase contribute the GDP. Old goods traded in market are not counted. Pure Financial transactions are not included in GDP lke investments in stocks, bonds etc.
Bob's actions contribute to GDP that year = Purchase of new truck + Purchase of new watch
Bob's actions contribute to GDP that year =$12000 +2000*(1+25%)= $14500.00
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