Question

In what component of GDP (or aggregate expenditures), the following should be included?

1-An international student pays her tuition to Grossmont College.

2- A Californian family on vacation in the U.S. rents a car.

Answer 1

Ans:

An international student pays her tuition to Grossmont College - Net exports.

A Californian family on vacation in the U.S. rents a car - Private consumption expenditure.

GDP is the market value of all final goods and services produced in a country during a period.Components of GDP are a) private consumption expenditure,b) investment expenditure c) government purchase of goods and services d) net exports.

Private consumption expenditure includes value of goods and services purchased by households and other institutions for current use.Hence renting a car is included in private consumption expenditure.

Payment of tuition fee to Grossmont College by international student is considered as export of services and included in net exports.