[Related to the Economics in Practice on p. 119] Which of the following transact

Question

[Related to the Economics in Practice on p. 119] Which of the following transactions would not be counted in GDP? Explain your answers. a. General Motors issues new shares of stock to finance the construction of a plant. b. General Motors builds a new plant. c. Company A successfully launches a hostile takeover of com- pany B, in which company A purchases all the assets of company B. d. Your grandmother wins $10 million in the lottery. e. You buy a new copy of this textbook. f. You buy a used copy of this textbook. g. The government pays out Social Security benefits. h. A public utility installs new antipollution equipment in its smokestacks. i. Luigi

Explanation / Answer

a. not counted as there is no corresponding production of goods and services; b. counted because it is counted as investment in construction;c. not counted because it is a mere transfer of ownership ;d. not counted ,because it is a windfall gain and no corresponding productive activity takes place ;e. counted ,because it is expenditure on final goods;f. not counted because this expenditure has been accounted for in the year it was first purchased;g. counted ,because it is a part of compensation of employees;h. counted, because it is a part of government expenditure;i. not counted because cheese here in this case is an intermediate good ;j .not counted because no income is generated due to a lack of productive activity;k. not included because production and sales of illegal goods is not included in estimating the output of the economy as it is both difficult to estimate and illegal. PLEASE GIVE FIVE STARS IF YOU LIKED THE ANSWER.

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