If you buy a new car, the entire purchase is counted as consumption in the year

Question

If you buy a new car, the entire purchase is counted as consumption in the year in which you make the transaction. Explain briefly why this is in one sense an “error” in national income accounting. (Hint: How is the purchase of a car different from the purchase of a pizza?) How might you correct this error? How is housing treated in the National Income and Product Accounts? Specifically how does owner- occupied housing enter into the accounts? (Hint: Do some Web searching on “imputed rent on owner-occupied housing.”)

Explanation / Answer

This is in one sense error because purchasing car may be considered also investment that leds to production of services particularly when it is used for commercial use also. We can correct it by listing it as investment

The owner occupied houses are treated by I'm putting Rents to them

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