14 Indicate how each of the following will affect this years

14. Indicate how each of the following will affect this year\'s GDP: a. You suffer $10,000 of damage when you wreck your automobile. b. You win $10,000 in a state lottery. c. You spend $5,100 in January for 100 shares of stock ($5,000 for the stock and $100 for the sales commission) and sell the stock in August for $8,200 ($8,000 for the stock and $200 for the sales commission). d. You pay $500 for this month\'s rental of your apartment. e. You are paid $300 for computer services provided to a client. f. You receive $300 from your parents. 9. You get a raise from $8 to $10 per hour and simultaneously decide to reduce your hours worked from 20 to 16 per week. h. Y ou earn $4,000 working in Spain as an English instructor.

Solution

Gross domestic product (GDP): This is the monetary value of all finished goods and final products produced within the country’s boundary, in a given period of time.

a.

It increases GDP by $10,000, since destroying a car is an activity and the amount of damage is earned by someone else.

b.

The amount of lottery $10,000 is not factor income but transfer income. Therefore, it should not be included as GDP.

c.

Only sales commissions should be included in GDP, since this is an income. Purchase or sale of shares should not be included in GDP, since these are financial transactions.

d.

This is rental income by the landlord. Therefore, this should be included in GDP.