Question

For each of the following scenarios, classify the type of spending (C,I,G,Xn), describe its impact on gross domestic product (increase, decrease, not impacted), and explain.
A. A new airplane purchased by United Parcel Service.
B. The tuition you pay during your first year of college.
C. The social security check your grandmother receives.
D. A new purchase of 50,000 shares of Time/Warner stock.
E. A new pair of tennis shoes made in China and purchased by an American shoe store.

Answer 1

Answer:

A. A new airplane purchased by United Parcel Service.

• Investment (in fixed assets), GDP grows

B. The tuition you pay during your first year of college.

• Consumption (of services), GDP grows

C. The social security check your grandmother receives.

• Not included in GDP, social security checks are considered transfer payments.

D. A new purchase of 50,000 shares of Time/Warner stock.

• Not included in GDP, only IPOs are included in GDP

E. A new pair of tennis shoes made in China and purchased by an American shoe store.

• Import, GDP decreases since net exports decrease

Explanation: