Remember GDP is the total (gross) measured output produced (product) within a country (domestic) during a certain time frame.  The key words in the name mean something.  If nothing is produced, it is not GDP (e.g. a transfer of existing property rights, or purchase of GDP produced in a prior year).  If it is not produced domestically within a country's borders, it is not that country's GDP (e.g. a car imported from Canada - that is part of Canada's GDP).  GDP excludes non-measured output such as illegal transactions (e.g. illicit drug sales, prostitution, underground black market activity) and non-market output (e.g. cooking your own dinner as opposed to eating out at a restaurant) and it includes things produced but not necessarily consumed (e.g. a positive change in inventories being unconsumed output produced).  Also note that while GDP uses the "P" for product, most is now for services (e.g. a doctor's exam, lawyer fees) as opposed to tangible (durable and non-durable) goods, and those are final goods and services, not intermediary goods and services (e.g. exclude transactions such as a business purchasing bricks to build a house as that is already included in the final purchase price of a house and including such would result in double-counting).  GDP must fall into either C, I, G, or X categories by the expenditures approach (Consumption, Government, Real Investment = final capital goods, or Net Exports = Exports-Imports).  Two consecutive quarters of declining Real GDP officially defines a recession (where "real" refers to a quantity measure taking out the impact of price changes between quarters, i.e. deflating it using a price index so such is uniformly measured in dollars of constant purchasing power).   Nominal GDP is the actual dollar amount spent.

It is always possible that these questions are used as homework or exam questions in current or future semesters.


Is this part of this year's GDP of the US?

1.)  Last week you purchase a new car built in Detroit.
2.)  Last week you purchase a used 1995 model Saturn built by General Motors in Detroit.
3.)  Last week you purchase a new BMW built in Munchen Germany.
4.)  Last week you purchase a new Accord built in Georgia by a Japanese firm, Honda.
5.)  General Motors builds a car in Detroit this year and sells it to someone in England this year for $30,000.
6.)  AOL constructs a new building to house an internet routing facility for $20 million this year.
7.)  AOL purchases an existing computer warehouse building from Yahoo last week.
8.)  Last week you purchase 100 newly issued shares Yahoo stock directly from Yahoo.
9.)  The $10 stock brokerage commission you pay to buy a 100 shares of General Motors stock last week.
10.)  Local government pays the salary of a police officer on duty last week to prevent property and civil crimes.
11.)  Your grandmother receives a Social Security check for $600 last month.
12.) Last weekend you pay your sister $10 to wash your car (and no Social Security taxes are withheld from her pay).
13.) Dell computer purchases glass last week to use in making personal computer monitors.

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1.)  Yes - a Consumption expenditure.
2.)  No - this was part of the GDP of 1995, nothing is produced this year.
3.)  No - this is this year's GDP of Germany, not the USA.   (It is included in Consumption component, but then fully subtracted off in the Net Exports component, with zero impact on US GDP.) 4.)  Yes - this is a product of the USA since built in the USA, the ownership of the factory is irrelevant.
5.)  Yes - an Export adding to the Net Export component of GDP, a product of the USA consumed abroad.
6.)  Yes - part of the Investment component, a capital good produced.
7.)  No - this was part of the GDP (Investment component) for the year it was produced and only a transfer of existing property rights.
8.)  No - nothing is produced, this is a financial investment and not a real investment for capital goods.
9.)  Yes - the commission is for a service performed this year.
10.)  Yes - a service consumed, part of the Government component of GDP
11.)  No - nothing is being produced, while being a government expenditure for a transfer payment, not part of the Government component of GDP.
12.) No - this is unmeasured output.
13.) No - this is an intermediate good.  When the computer monitor, a final good, is sold, that is GDP.  If we counted intermediate transactions, such as for the glass, we would end up double counting.

Also note:  GDP can be broken down by either the income or expenditures approach.  With a few minor accounting adjustments, adding up the amount spent purchasing GDP equals the amount of aggregate income derived from producing GDP.  This relationship is key to understanding for the aggregate expenditures or Keynesian model covered in the course.

Also see:

• Latest GDP statistics and breakdown from the US Dept. of Commerce
• A graph of the latest GDP growth statistics from the US Dept. of Commerce