Sean and Yvette Durand live in Swarthmore, PA. Their son, Bob, owns his own plumbing business.

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). Check all that apply.

1. Sean buys a bottle of Italian wine.

2. Yvette gets a new refrigerator made in the United tates.

3. Sean's employer upgrades all of its computer systems using U. S. made parts.

GDP (Gross Domestic Product) is the final value of goods and services produced within the boundaries of the country in a year.

The formula is as under

GDP = C+I+G + (X-M)

Where

C = consumption

I = Investment

G = Government Expenditure

X = exports

M = Imports

Scenario 1:

Sean buys a bottle of Italian wine

Answer:

In order calculate GDP of US Sean bought an Italian wine. The wine is not of US origin. It is classified as an import. Will be deducted from US GDP under the head of imports

Scenario 2:

Yvette gets a new refrigerator made in the United states

Answer:

GDP includes the final value of the goods and services produced in the country in a year.

Yvette bought a new refrigerator it is part of the C (consumption) section of the GDP. Hence it will be part of US GDP.

Scenario 3:

Sean's employer upgrades all of its computer systems using U. S. made parts.

Answer:

The employer has upgraded the computer system using made in US parts.

It is an investment and will form part of the investment (I) section of the US GDP calculation.