1) For each of the transactions listed below, state whether or not it would affe

Question

1) For each of the transactions listed below, state whether or not it would affect U.S. GDP AND state which of the following national income accounting categories it would enter ( C, I, G, NX). a) you buy a new Ford Taurus from a Ford dealer in Portland C b) you buy a used computer from a friend. C c) you buy 100 shares from General Motors d) GM's inventories of SUVs rise by 5,000 vehicles L e) the government sends your grandmother her monthly Social Security check G f) the government buys a new submarine for $1 billion.

Explanation / Answer

Question 1

(a)

You buy a new Ford Taurus from a Ford dealer in Portland.

Purchase of new final goods are included in GDP.

So,

This transaction would be included in the US GDP and thus would affect the US GDP.

This transaction would enter the Consumption (C) category.

(b)

You buy a used computer from a friend.

Purchase of second hand goods are not included in GDP.

So,

This transaction would not be included in the US GDP and thus would not affect the US GDP.

(c)

You buy 100 shares from General Motors.

Purchase of shares, stocks, debentures are not included in GDP.

So,

This transaction would not be included in the US GDP and thus would affect the US GDP.

(d)

GM's inventories of SUVs rise by 5,000 vehicles.

Change in inventories are counted as part of GDP.

So,

This transaction would be included in the US GDP and thus would affect the US GDP.

This transaction would enter the Investment (I) category.

(e)

The government sends your grandmother her monthly Social Security Check.

Transfer payments like social security payments, unemployment insurance payments etc. are not included in the GDP.

So,

This transaction would not be included in the US GDP and thus would affect the US GDP.

(f)

The government buys a new submarine for $1 billion.

Purchase of goods and services by government are included in GDP.

So,

This transaction would be included in the US GDP and thus would affect the US GDP.

This transaction would enter the Government Purchases (G) category.

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