Question

Do the following activities contribute to US GDP in 2020? Explain why or why not? In which year do these activities contribute to US GDP and to which component of expenditure?
(a) A new Toyota Camry built in Japan and sold in the US in 2019

(b) A new Toyota Camry built in Tennessee in December 2013 and sold in Canada in January 2020

(c) A used Toyota Camry built in Japan in 2007 and sold in the US in December 2020

(d) A new Toyota Camry built in Tennessee in December 2013 and sold in North Carolina in June of 2020

(e) A used Toyota Camry bought by a used car dealership for $5000 and sold for $6000 in 2020

Answer 1

Answer:

Explained below.

Explanation:

In option (a) no it does not contribute to the US GDP in any year. The transaction appears in expenditure as an increase in consumption and a decrease in net exports that offset. According to option (b) yes it contributes to US GDP in 2013. The transaction appears as an increase in investment (increase in inventory). In 2014, the transaction appears as an increase in net exports offset by a decrease in investment. According to option (c), the transaction appears in expenditure as an increase in consumption in 2014 offset by a decrease in net exports. Option (d) represents the transaction appears as an increase in investment (increase in inventory). In 2014, the transaction appears as an increase in consumption offset by a decrease in investment. According to option (e) yes, it contributes $1000 to US GDP in 2014. The $6000 purchase price exceeds the price paid by the used car dealer. The difference represents value added by the dealership - this is a service that should be counted as part of GDP.