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In 2018, Grace  bought a used car for her personal use for RM50,000; and ...

In 2018, Grace
 bought a used car for her personal use for RM50,000; and
 spent RM8,000 on new car parts made in Malaysia.
For each of the two transactions above, explain how the components of GDP and the total GDP
in 2018 are affected. What is the combined effect of these two transactions on Malaysian GDP
in 2018? [5 marks]

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Answer #1

Spending on used car is excluded from GDP to avoid double counting.

RM 8,000 that is spent on new car parts made in Malaysia (assuming Malaysia is Home country since purchase value is given in Malaysian Ringgit), is included in Personal Consumption Expenditure component of GDP.

Therefore, Malaysian GDP will increase by RM 8,000.

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