Explain why the value of GDP in 2009 would or would not change as a result of each transaction described below: a. In 2009, the Smith family purchases a new house that was built in 2009. b. In 2009, the Jones family purchases a house that was built in 2001. c. In 2009, a construction company purchases windows to put in the Smith family home that was built in 2009. d. In 2009, Mr. Jones paints all of the rooms of the Jones family house purchased in 2009. e. In 2009, Mr. Smith uses an online brokerage service to purchase shares of stock in a construction company.
If you could quickly say why as well that would be great.
lc2010-01-25T18:01:53Z
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a. Counts as part of the GDP of 2009, because it is a new house. b. It does not count, because that house was part of the GDP of 2001. c. The window purchases do not count, because they are considered intermediate inputs. d. Does not count, because there is no recorded payment for the service provided. e. Does not count, because financial investment (as opposed to actual investment in capital goods) is not counted as part of GDP.
a. GDP in 2009 increases by the purchase price of the house, which is a newly produced good. b. GDP in 2009 does not change because the house is NOT a newly produced good, since it was built in 2001. Transactions involving used goods are not included in GDP. c. GDP in 2009 does not change directly because the windows are intermediate goods, not final goods. The value of intermediate goods is not included in GDP to avoid double counting. The value of the windows is implicitly included in the price of the house. d. GDP in 2009 would change by the purchase price of the paint and supplies, but not by the implicit value of the painting services provided by Mr. Jones because home production is not included in GDP. e. GDP in 2009 would increase by the charge for using the online brokerage service but not by the amount of stock purchase because financial transactions do not represent the production of final goods and services and are not included in GDP.