Question

Determine whether each of the following examples would be included in Gross Domestic Product (GDP). a. When Judy went to the grocery store yesterday, she bought three pounds of potatoes. Judy's purchase of potatoes (Click to select) . b. Ford Motor Company buys four tires to put on a new Ford Mustang. The purchase of the tires (Click to select) . c. The U.S. Air Force purchases two new fighter jets from Boeing. The purchase of the two fighter jets (Click to select) . d. When Joey had his birthday last week, his grandmother sent him a $100 bill that he could spend.

Answer 1

Answer:

Items included in GDP

Judy's purchase of potatoes

The purchase of the two fighter jets

Explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export

Net export = exports – imports  

Items not included in the calculation off GDP includes:  

1. services not rendered to oneself

2. Activities not reported to the government  

3. illegal activities

4. sale or purchase of used products

5. sale or purchase of intermediate products

Judy's purchase would be included as part of consumption spending by households on non durable items.

The purchase of the tires would not be included in the calculation of GDP because the tires are intermediate goods. Only final goods are included in the purchase of GDP

The purchase of the two fighter jets would be included in GDP as part of government spending

the $100 gift would not be included in the calculation of GDP