Question

2. which of the following purchases of newly produced goods would NOT be directly included in the calculation of the four types of spending on final goods and services that are counted in gdp?

a. purchase of a house by a household in Alabama

b. purchase of food by a consumer

c. purchase by general motors off machines made in Japan that are used to produce cars in Detroit

d. government spending to purchase planes

e. purchase of steel produced in India by boeing that it is too produce planes

Answer 1

Option c: purchase by general motors off machines made in Japan that are used to produce cars in Detroit

Option e: purchase of steel produced in India by boeing that it is too planes

Maxhines are purchased from a foreign country is used to produce cars. Steel is purchased from a foreign country is used to produce planes. Thus machines and steel are the intermediate good in production the final good which is planes. So machines and steel are not included in claculation of GDP to avoid double counting.

Y= C+ I +G + NX

Purchase of new house is include in GDP as it is a part of investment component. Food consumption is a part of comsumption component of GDP directly. Government Spending on planes is directly a component of G.

Note: value of the intermediate goods purchased from foreign country are subtracted from exports as a part imports.