Question

For each of the following transactions, explain briefly why they would or would not be counted in the GDP of the United States. In your explanation, point out what component(s) or element(s) of GDP change and why.

A Chrysler dealership in Utah has 20 unsold new 2019 model cars at the end of 2019

You marry your accountant and (s)he then takes care of your tax returns for free.

You buy a fresh loaf of bread at your local bakery

You baby-sit for your uncle’s children and he gives you $25 for a job well done

Answer 1

1) Inventories created at the end of 2019 will be counted in GDP of 2019 such that cars produced in 2019 will be counted in GDP of 2019 itself rather than any other year.

2) If you marry your accountant who files you tax for free, you save money and there is no transaction of money included, thus no money is included in GDP.

3) Buying a fresh loaf of bread will be counted in GDP because it involves trade of money.

4) Money in kind will not be included in GDP because there is no involvement of production of new goods.