For the following, determine whether or not it counts in the U.S. GDP for 2014. If so, determine which category it belongs in. If not, write why it doesn’t count in GDP.

Question

1. Social Security payments to a retired factory worker.

2. A new car purchased by Alamo Rent-A-Car to be rented to customers.

3. A driver rents a car from Kramerica Rent-A-Car.

4. The purchase of $5000 worth of stock in Kramerica Industries.

5. Ford Motor Co. purchases a new stereo from Sony that they put into new Ford

cars and trucks.

6. David Puddy buys a new car stereo in January, 2015 that he installs into his

BMW. The stereo was produced in December, 2014.

7. A new Dell Computer produced in the U.S. and sold to a customer in Belgium.

8. Frozen waffles that are made in Belgium and are purchased by customers in

Sugar Land.

9. Art Vandelay buys a car insurance policy for his new car.

10.Mr. Pitt buys a new house that was just built in Sugar Land.

11.Why aren’t intermediate goods counted in GDP?

Answer 1

1) Not counted (transfer payment)

2) Counted in business investment (purchasing a good)

3) Counted in consumption (payment for a service)

4) Not counted (this is simply a transfer of ownership)

5) Not counted (intermediate good)

6) Counted in consumption (it was produced in 2014 thus it counts in 2014)

7) Counted in exports

8) Not counted (imports)

9) Counted in consumption

10) Counted in business investment

11) Intermediate goods aren't counted because they are included in something that will be resold in the future..thus it would be double counting