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    Transactions that contribute to GDP

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    Which of the following transactions would not be counted in GDP? Explain your answers.
    2) American airlines merges with US Airways
    3) Walmart's inventory decreases.
    4) You buy 5 quarts of oil and change the oil in your car.
    5) You make $200 from a garage sale
    6) Subway buys cheese to make subs
    7) You buy a new textbook
    8) The government pays Medicare benefits.
    9) Federal governemetn icreases the budget of Homeland Security
    10) You buy a used car.
    11) California legalizes medical marijuana.

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    Solution Preview

    Step 1
    A change in GDP can be assessed in three ways. First is a change in output or production. Second, a change in expenditure means a change in GDP. Third, a change in income means a change in GDP.
    Step 2
    American Airlines merges with US Airways. This is not counted in the GDP. The services provided by the airlines are included in the GDP the mere action of merging does not increase income or current output.
    Step 3
    Decrease of Walmart's inventory counts in the GDP. A change in inventory means a decrease ...

    Solution Summary

    GDP estimation is discussed step-by-step in this solution. The response also has the sources used.