Question

Which of the following DOES add to US GDP?

• A. Wonder Bread buys U.S. flour to make their bread
• B. United Airlines buys a plane from Airbus, made in France
• C. Tesla Motors sells 5000 sedans in Japan
• D. Mitsubishi Motors sells a large car manufacturing facility to a real-estate firm

Answer 1

The GDP can be defined the market value of all goods and services which are produced in the domestic territory of the country in the current financial years.

GDP=C+I+G+X-M

A.

When Wonder Bread buys flour to make their bread, then it is an intermediate consumption and value of intermediate consumption is not included in the GDP. Hence this will not be included in the US GDP.

B.

Since United Airlines buys a plane from Airbus, made in France, so it is an import, therefore it will be substracted from the US GDP.

C.

Since Tesla Motors sells 5000 sedans in Japan, so it is US export and therefore it will be added in the US GDP.

D.

Since Mitsubishi Motors sells a large car manufacturing facility to a real-estate firm and therefore it is sell of old goods and sell of used or old goods is not a production of new goods and services. Hence this will not be included in the GDP.