Question

The following expenditure equation is utilised to measure the economy: GDP = C + + G + (X-M) Analyse each of the situations below and state which expenditures (or parts of the expenditures) would be counted under which of the four segments of the GDP expenditure equation, ie C, I, G or (X-M). a. The purchase of Australian made furniture by a business for use in its cafe. b. The purchase of foreign made furniture by a business for use in its café. C. The purchase of wood by a business to manufacture furniture which will then be sold to Australian and foreign customers. d. The purchase of 100 shares in ANZ Bank through a stockbroker. e. Purchase of a 10-year-old foreign-made second-hand car from a Car Sales business in Parramatta, NSW. f. A pension paid by the Australian Government to an old age pensioner. g. You babysit for your nieces and nephews so your sister and her husband can go out for dinner.

Answer 1

a) The Australian made furniture will increase the investment and imports in the economy. (for US economy, if you are in Australia then remove the imports part same for part B below. )

b) This will be part of consumption and imports.

c) this woods will not be recorded in the GDP only the exports will be aprt of exports.

d) Shares are not recorded in the GDP.

e) Old goods are not part of the GDP.

f) Pensions are not part of the GDP as they are transfer goods.

g) Services that do not involve money is not part of the GDP.