Question

For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M).

Transaction C I G X M
1. Charles's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China.
2. Dina buys a new BMW, which was assembled in Germany.
3. Gilberto buys a new set of tools to use in his plumbing business.
4. Dina gets a haircut.
5. The Federal Aviation Administration expands the runways at Philadelphia International Airport, which is just a few miles from Charles and Dina's house.

Answer 1

Transactions included in the calculation of U.S. GDP:

Transaction C I G X M

1. X

2. M

3. I

4. C

5. G

Step-by-step explanation:

a) GDP constituents:

Consumption (C) = private consumption expenditures by US households and non-profit-making organizations.

Investment (I) = business expenditures by profit-making organizations for purchase of capital goods or input for further processing.

Government purchases (G) = government spendings for public goods.

Exports (X) = Goods and services moved from the US to other countries.

Imports (M) = Goods and services from other countries into the US.