Question

directions: for each of the following situations, determine whether or not each is counted in gdp. if it is counted, tell me whether it is consumption, investment, government spending, net exports. if it is not counted, then tell me why not.

1. james earns $16/hour working at wendys
2. carla purchases a brand - new toyota tundra made in san antonio, tx
3. the united states marine corps invades a major city, and in the process, spends $5 million on american - made weaponry.
4. blue cross/blue shield of california pays $30,000 for one round of chemotherapy for one of their insurance clients.
5. target stores employs a senior ios engineer and pays them $100,000.
6. intel spends $300 million building a semiconductor factory in san jose, costa rica. not counted as gdp because it is outside the u.s.
7. intel spends $300 million building a semiconductor factory in san jose, california. investment
8. crystal pays $1200/month to her landlord for her nail salon. consumption
9. apple records $500 million in sales and $300 million in expenses to make and produce the products. the remaining amount is $200 million. investment
10. john deere receives their first payment from tess for her new tractor.
11. sherry receives a $500,000 stock dividend
12. rachel buys herself a $500,000 house that was built 50 years ago. it burned to the ground the next day.
13. your teacher decides to give up on teaching and become a stay - at - home parent to raise her own children.
14. college students, astounded by the costs of new textbooks, decide to purchase used textbooks at the bookstore.
15. the president of france decides to buy and ship 15 dozen in - n - out hamburgers to the elysee palace, where he lives in paris, france.

Explanation:

1. Wages are part of consumption as they contribute to household spending power.
2. Purchase of a new vehicle is consumption as it is a final - good purchase by a household.
3. Military spending by the government is government spending in GDP.
4. Insurance payment for medical treatment is consumption as it is a service purchased.
5. Wages of an employee are consumption as they are part of household income and spending.
6. Investment outside the U.S. is not counted in U.S. GDP as GDP measures domestic production.
7. Building a factory in the U.S. is investment as it is a capital - good addition to the domestic economy.
8. Rent payment is consumption as it is a service purchase.
9. Retained earnings of a firm are considered investment as they can be used for future business expansion.
10. Sale of a new tractor is consumption if it's a final - good purchase by a household or investment if it's for business use (assuming household use here, so consumption).
11. Stock dividends are not directly counted in GDP as they are a transfer of ownership value and not a production or expenditure on goods and services.
12. Purchase of an old house is not counted in current GDP as it was already counted when it was newly built.
13. A teacher becoming a stay - at - home parent does not involve a market transaction and is not counted in GDP.
14. Purchase of used textbooks is not counted in GDP as they are not newly produced goods.
15. Purchase of American hamburgers by a foreigner and shipped abroad is an export, which is part of net exports in GDP calculation.

Answer:

1. Consumption
2. Consumption
3. Government spending
4. Consumption
5. Consumption
6. Not counted as GDP (outside the U.S.)
7. Investment
8. Consumption
9. Investment
10. Consumption
11. Not counted in GDP
12. Not counted in GDP
13. Not counted in GDP
14. Not counted in GDP
15. Net exports (export)