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Which of the Following Transactions Adds to U.S. GDP for 2015?
Gross Domestic Product (GDP) is a crucial indicator of a country’s economic performance. It represents the total value of all goods and services produced within a nation’s borders in a specified period, usually a year. Understanding what transactions contribute to GDP is essential for evaluating economic growth. In the context of the United States in 2015, let’s explore which transactions added to the country’s GDP that year.
1. The purchase of a new car: Yes, this transaction adds to GDP as it represents a final good produced within the country.
2. A car purchased from a used car dealer: No, this transaction does not add to GDP since it involves the exchange of an existing good.
3. The purchase of a new house: Yes, this transaction adds to GDP as it represents a final good produced within the country.
4. The purchase of a house built in 2005: No, this transaction does not add to GDP as it involves the exchange of an existing good.
5. A farmer sells wheat to a bakery: Yes, this transaction adds to GDP as it represents the sale of a domestically produced good.
6. A company purchases new machinery: Yes, this transaction adds to GDP as it represents investment in new capital goods.
7. A family buys groceries from a supermarket: No, this transaction does not add to GDP as it represents the purchase of intermediate goods, not final goods.
8. A foreign tourist buys a souvenir from a gift shop: Yes, this transaction adds to GDP as it represents the sale of a domestically produced good to a foreigner.
Frequently Asked Questions:
1. What is GDP?
Gross Domestic Product (GDP) is the total value of all goods and services produced within a country’s borders in a specific time period.
2. How is GDP calculated?
GDP is calculated using the expenditure approach, which sums up consumption, investment, government spending, and net exports.
3. Why is GDP important?
GDP provides a measure of a country’s economic growth and helps policymakers make informed decisions to manage the economy effectively.
4. What contributes to GDP?
Consumer spending, investment, government spending, and net exports (exports minus imports) contribute to GDP.
5. Why doesn’t the purchase of used goods add to GDP?
Used goods are not considered part of current production as they were previously counted in GDP when they were first sold as new.
6. What is the difference between final goods and intermediate goods?
Final goods are goods sold directly to the end consumer, while intermediate goods are used in the production process and do not directly satisfy consumer needs.
7. Can GDP decrease?
Yes, GDP can decrease if there is a decline in production, consumption, investment, government spending, or net exports.
8. Are all goods and services included in GDP calculation?
Only goods and services produced for final consumption are included in GDP calculation. Intermediate goods and non-market activities, such as household chores, are excluded.
Understanding the transactions that add to GDP is crucial for assessing the economic well-being of a country. By analyzing these transactions, policymakers and economists can formulate strategies to foster economic growth and stability.
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