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Assignment 4 Solution

For each transaction described in the document, the assistant determines how much, if any, will be contributed to the current year's GDP of the USA. The transactions include purchases of gas, a mansion, childcare services, an auto plant, lottery winnings, a TV commercial fee, and sales of new and used cars. The amounts contributed range from $2 to $100,000,000 depending on the nature of the economic activity and whether it involves the production of goods and services in the USA during that fiscal year.

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2K views2 pages

Assignment 4 Solution

For each transaction described in the document, the assistant determines how much, if any, will be contributed to the current year's GDP of the USA. The transactions include purchases of gas, a mansion, childcare services, an auto plant, lottery winnings, a TV commercial fee, and sales of new and used cars. The amounts contributed range from $2 to $100,000,000 depending on the nature of the economic activity and whether it involves the production of goods and services in the USA during that fiscal year.

Uploaded by

Saqib Hasan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment – 4

For each of the following transactions, determine the contribution to the current year's GDP of USA.

a) On January 1, you purchase 10 gallons of gasoline at $2.80 per gallon. The gas station purchased
the gasoline the previous week at a wholesale price (transportation included) of $2.60 per
gallon.

Answer:
(2.80*10) – (2.60*10) = $2 will be contributed to the current year’s GDP of USA.
If the fiscal year of USA begins from January then $26 will not be contributed in current year
GDP.

b) Colonel Hogwash purchases a Civil War-era mansion for $1,000,000. The broker's fee is 6%.

Answer:
Broker’s Fee = 0.06 * 1,000,000 = $60,000 will be contributed in current year GDP of USA.

c) A homemaker enters the work force, taking a job that will pay $40,000 over the year. The
homemaker must pay $16,000 over the year for professional child care services.

Answer:
$40,000 + $16,000 both will contribute in current year GDP of USA.
Because are the income against the services.

d) A Japanese company builds an auto plant in Tennessee for $100,000,000, using only local labor
and materials. (Hint: The auto plant is a capital good produced by Americans and purchased by
the Japanese.)

Answer:
$100,000,000 will contribute in current year GDP because it has been built by local labor and
materials, also it has been built on the land of America.

e) You are informed that you have won $3,000,000 in the New Jersey State Lottery, to be paid to
you, in total, immediately.

Answer:
It will not contribute in current year’s GDP, because it cannot be categorized as income,
expenditure or produced goods/services.

f) The New Jersey state government pays you an additional $5000 fee to appear in a TV
commercial publicizing the state lottery.

Answer:
This $5000 is contributed in current year’s GDP of USA because it is the fee paid for
advertisement service.

g) Hertz Rent-a-Car replaces its rental fleet by buying $1 00,000,000 worth of new cars from
General Motors. It sells its old fleet to a consortium of used car dealers for $40,000,000. The
consortium resells the used cars to the public for a total of $60,000,000.

Answer:
$100,000,000 is the money paid in exchange to New Cars
60,000,000 – 40,000,000 = $20,000,000 is the amount earned by car dealer
Both of these amounts will contribute in current year’s GDP of USA.

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