2 Activities included and not included in the calculation of

2. Activities included (and not included) in the calculation ofGDP The gross domestic product (GDP) of the United States is defined as the all in a given period of time. Based on this definition, indicate which of the following transactions will be included in (that is, directly increase) the GDP of the United States in 2017 2017 GDP Included Excluded Scenario Treetopplers, a U.S. lumber company, produces wood at a plant in Oregon on September 25, 2017. It sells the wood to Buildit and Partners, a developer, for use in the production of a new house that will be built in the United States in 2017. (Note: Focus exclusively on whether production of the wood increases GDP directly, and ignore the effect of production of the new house on GDP.) Awake Cafe, a U.S. coffee company, produces a latte at its location in Minneapolis on January 6, 2017. It sells the latte to a customer immediately. You chop down a cherry tree on your property in California and make a dining room table in 2017. A similar table sells for $800 in a local furniture store Sofaland, a Swedish furniture company, produces a table at a plant in Virginia on December 14, 2017. It sells the table to a college student on December 24 Athleticus, a U.S. shoe company, produces a pair of sneakers at a plant in Vietnam on March 11, 2017. Athleticus imports the pair of sneakers into the United States on May 29, 2017

Solution

The Gross Domestic Product of USA can be defined as the total monetary value of all goods and services produced within the borders of the USA in a given period of time.

1. Yes, production of wood increases the GDP.

2. Yes, producing latte and selling coffee to a customer increases the GDP.

3. No. Chopping down my tree and making a dining table for myself does not involve any monetary transaction and thus does not get included in GDP.

4. Yes, since the table is made in the USA, it does get counted in the GDP.

5. No, since the shoes are not produced in USA, it does not get counted in GDP.