8. Which of the following transactions would be included in GDP for the United S

Question

8.    Which of the following transactions would be included in GDP for the United States? Provide an explanation to support your answer.

a)   The salary of a Bulgarian college student working a summer job in a Ford plant located in Bulgaria.

b)   The purchase of materials by you, at the Home Depot in Springfield, to build a doghouse in your backyard yourself. The doghouse is for your dog. (Note: The transaction you are considering is the one you made at Home Depot.)

c)   You use some of your paycheck to purchase 100 shares of Microsoft stock.

d)   A hair salon purchases hair gel, from its supplier, to use on its customers who come in for “complete” haircuts. “Complete haircuts” are priced at $30. (Note: The transaction you are considering is just the one made by the hair salon.)

e)   The child support payments that Jane receives each week. Ron has this amount taken out of his paycheck each week. (Note: The transaction you are considering is the one attributed to Jane. That is, is the check in Jane’s hands added to GDP?)

Explanation / Answer

a) No, any Bulgarian student working in Bulgaria will not be included in the US GDP but it will be part of Bulgarian GDP.  

b) Yes, as I am the end user of the products I brought from the market. It will be included in the GDP of the United States.

c) NO, buying and selling of stocks are not part of GDP.

d) No, as the hair gel is an intermediate product in the final service given to the consumer it will not be included in the GDP.

e) No, Transfer payments are not part of the GDP and Child support is transfer payment i.e. no service has been done in return for that money.

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