In the space below each part, write down how much nominal GDP changes as a resul
ID: 1214533 • Letter: I
Question
In the space below each part, write down how much nominal GDP changes as a result of each transaction. Note: Assume all production happens in the current year.
1. A used car dealer purchases an used F-150 pick-up for $20,000. The dealer repairs and cleans the vehicle and sells it for $24,000.
2. U.S. Airways purchases a new Airbus (A European jet producer) jet planes for $50 million.
3. A Chilean mining company purchases new Caterpillar (A U.S. machinery producer) trucks for $1 million.
4. Wal Mart purchases a T-shirt from China for $1 and sells it in a U.S. store for $5
Explanation / Answer
1. The value addition of 24000-20000= $4000 will be included in GDP so GDP will increase by $4000
2. Imports will increase so GDP will decrease by $50 million
3. Exports will increase so GDP will increase by $1 million
3. $1 will be import so will be decreased in GDP while next 5-1=$4 is value addtion so will be increasing GDP So net change in GDP = 4-1=$3