Question

What components of GDP (if any) would each of the following transactions affect? Explain. Remember Y=C(Y-T)+I(R)+G+X-M a. A family buys a new refrigerator. (Consumption expenditure includes durable and nondurable goods)

Answer 1

Answer:

A. The household purchase of a new refrigerator will directly lead to an increase in the consumption component of the Gross Domestic Product (GDP). Therefore, the GDP will increase by the amount of refrigerator purchased