In each of the following situations, explain what is/is not counted in this year
ID: 1206224 • Letter: I
Question
In each of the following situations, explain what is/is not counted in this year's GDP and why or why not (be very specific as to your reasoning): a. You bought a previously owned Will at GameStop b. You rent your textbook from Barnes & Nobles for the semester. c. You wash your parent's car inside and out as a gift for their anniversary. d. You buy a new hard drive to put into the old laptop you bought on eBay. c. Apple buys 100,000 monitors from China to use as replacements for products under warranty.Explanation / Answer
a)previously owned Wii at game stop- not included in GDP because current transactions involving assets and property produced in previous periods are not counted in the current GDP.
b) rent on textbook for the semester - includes in GDP because this year transaction
c) wash parents car as a gift - not included in GDP because it is not an economic activity
d) buy a new hard drive - included in GDP because it is an economic activity and creates a new value
e) Apple buys 100000 monitors from China - includes in GDP because it creates a new value
A product will only be counted in GDP one time in its life. So, current transactions involving assets and property produced in previous periods are not counted in the current GDP. For instance, if a laptop produced in the year 2000 is resold in 2006, the GDP of 2006 will not include the resale value of the laptop because this is a mere transfer of ownership entailing no creation of new value.
Other things not included in the GDP are government social security and welfare payments, current exchanges in stock and bonds, and changes in the values of financial assets. Since GDP measures the market values of goods and services, economic activities that do not pass through the regular market channels are excluded in the computation of GDP. GDP doesn't include activities that go on in black market channels. This is particularly important to note when looking at third world countries that may have a significant part of their economy involved in the sale of black market goods, in which case their level of productivity would not be accurately reflected by looking at GDP.
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