Question

To which component of the US GDP expenditure does each of the following belong to? (C,...

To which component of the US GDP expenditure does each of the following belong to? (C, I, G, NX, or none of the four)

a) the purchase of a lottery ticket.

b) a new car made in the US but not yet sold

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Homework Answers

Answer #1

As we know that GDP is the monetary value of all.goods and services produced in an economy over a period of time.GDP is expressed through an equation as

GDP = C+I + G +X-M

C is Consumption.

I is investment.

G is government spending.

X-M net exports (X exports and M is Imports).

GDP does not include the money earned from sale of second hand goods, , gambling etc.

1). The purchase of lottery ticket is included in Investment component of GDP as this is a part of capital formation and leads to production of goods and services.

2). The production of car is a part of investment .

Hope you got the answer.

Kindly comment for further explanation.

Thanks ?

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