Question

1. Which of the following events/activities would be included in this year’s GDP? If it does, explain briefly where it shows up. (a) You buy a U.S. treasury bond. (b) You prune trees in your backyard. (c) You volunteer 10 hours a week of your time to work for senior citizens. (d) A bartender receives a cash tip for his services. (e) Your grandmother buys you a card for your birthday from her social security income. (f) Your non–American instructor gives you a lecture on how to measure GDP.

Answer 1

Solution

The GDP of a country is the total value of goods produced / services rendered in that particular economy.

GDP = Consumption+Investment+Government's expenditure (only which leads to productivity) + Gross Exports - Gross Imports

The following events/activities would be included in this year’s GDP:

(e) Your grandmother buys you a card for your birthday from her social security income - Here the social security income your grandmother receives is not the part of the GDP calculation but the amount she spends in buying you a birthday card will be included in the GDP calculation.The amount is considered under consumption

(f) Your Non-American instructor gives you a lecture on how to measure GDP - The amount you pay to him for his service is shown under services section under the heading of imports while calculating GDP.

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