Determine Whether Each of the Following Transactions Will Be Counted

question 218

Essay

Determine whether each of the following transactions will be counted in the 2005 GDP of the United States. If the transaction is counted, identify which expenditure component (personal consumption, gross investment, government consumption and gross investment, or net exports) will be affected.
a.Norm, a frequent visitor to a local bar, purchases a Budweiser beer. (Budweiser beer is domestically produced.)
b.The owner of the local bar purchases a new domestically made cooler unit in which to store his beer.
c.Carla, a U.S. foreign exchange student, works her way through college in Germany as a waitress in a bar.
d.On her night off, Carla purchases a Budweiser beer for her friend in the German bar.

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Definitions:

Nonessential Goods

Products and services considered as non-critical for survival or basic living standards.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with cheaper ones.

Relative Price

Relative Price is the price of one good or service compared to another, usually reflecting its value in terms of another item rather than its absolute price in currency.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price point.