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Which of the following are included in
a. Cleaning services performed by Molly Maid Corporation
b. Lawn-mowing services performed by a neighborhood child
c. Drugs sold illegally on a local street comer
d. Prescription drugs manufactured in the United States and sold at a local pharmacy
e. A rug woven by hand in Turkey
f. Air pollution that diminishes the quality of the air you breathe
g. Toxic-waste cleanup performed by a local company
h. Car parts manufactured in the United States for a car assembled in Mexico
i. A purchase of 1,000 shares of IBM stock
j. Monthly Social Security payments received by a retiree
(a)
To explain:
Whether cleaning services can be included in the gross domestic product.
Answer to Problem 2P
Yes, the services by MM Corporation will be included in gross domestic product.
Explanation of Solution
The services by the MM Corporation is included in the gross domestic product because it has a significant effect in the country's economy.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(b)
To explain:
Whetherlawn-mowing services performed by a child of neighborhood can be included in the gross domestic product.
Answer to Problem 2P
No, lawn-mowing services performed by a child of neighborhood is not included in gross domestic product.
Explanation of Solution
The lawn-mowing services performed by child in neighborhood are not included in the gross domestic product because it does not have a significant effect on the country's economy. It does not account for any flow in the national income. Therefore, it will not be included in gross domestic product.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(c)
To explain:
Whether if drugs sold illegally on a local street corner can be included in gross domestic product.
Answer to Problem 2P
No, drugs sold illegally on a local street corner are not included in gross domestic product.
Explanation of Solution
The drugs sold illegally on a local street are not included in the gross domestic product because it is illegal and GDP does not count products and services that are producedillegally.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(d)
To explain:
Whether the prescribed drugs manufactured at the United States and sold at a local pharmacy can be included in the Gross Domestic Product.
Answer to Problem 2P
Yes, the prescribed drugs manufactured in the Unites States and sold at a local pharmacy are included in gross domestic product.
Explanation of Solution
The prescribed drugs manufactured inthe United States and sold at a local pharmacy are included in the gross domestic product. These drugs areproduced legally within the country, thus these drugs as a final product contribute to gross domestic product.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(e)
To explain:
Whether a hand-woven rug made in Turkey can be included in Gross Domestic Product.
Answer to Problem 2P
No, a hand-woven rug in Turkey cannot be included in Gross Domestic Product.
Explanation of Solution
The hand woven rug can be included in the gross domestic product because it has a significant effect on the country's economy.However, this hand woven rug was made in Turkey, this means it was produced outside the border of the country. Hence, this cannot be included in the GDP.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(f)
To explain:
Whether air pollution can be included in the gross domestic product.
Answer to Problem 2P
No, air pollution that diminishes the quality of air is not included in the gross domestic product.
Explanation of Solution
Air pollution that diminishes the quality of air is not included in the gross domestic product as it does not add any value to the national income. It is altogether a different concept of environment pollution.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(g)
To explain:
Whether the toxic waste cleanup performed by a local company is included in the Gross Domestic Product.
Answer to Problem 2P
Yes, the toxic waste cleanup performed by a local company is included in the Gross Domestic
Product.
Explanation of Solution
The toxic waste cleanup performed by a local company is included in the gross domestic productas it provides with a service, which generates income for the economy; thus, it will be included in the Gross Domestic Product.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(h)
To explain:
Whether the car parts manufactured in the United States for a car assembled in Mexico are included in Gross Domestic Product.
Answer to Problem 2P
Yes, the car parts manufactured in the United States for a car assembled in Mexico can be included in gross domestic product.
Explanation of Solution
The car parts manufactured in the United States for a car assembled in Mexico are included in the gross domestic product because it has a significant effect in the country's economy. It generates income through the assembly units that are present within the country. The car parts manufacturer are providing employment, generating revenue through the final product.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(i)
To explain:
Whether the purchase of shares of 1,000 IBM stock is included in gross domestic product.
Answer to Problem 2P
No, the purchase of 1,000 IBM stock is not included in the gross domestic product.
Explanation of Solution
The purchase of 1,000 IBM stock is not included in the gross domestic product because it does not have any significant effect on the country's economy as only the owner of stock is changing.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
(j)
To explain:
Whether the monthly social security payments received by a retiree can be included in the gross domestic product.
Answer to Problem 2P
No, the monthly social security payment received by a retiree is not included in the gross domestic product.
Explanation of Solution
The monthly social security payment received by a retiree is not included in the gross domestic product because it does not have a significant effect in the country's economy and it will also lead to double counting.
Gross Domestic Product:
The calculated value of a country's economic activity is known as gross domestic product. The price value of all finished goods and services manufactured within a country are included in deriving the value of GDP for a specific financial period.
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Chapter 19 Solutions
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