Micah buys a used car for $10,000 and spends $200 on a new radio that is made in the U.S.The end result of these two transactions is
A)U.S.consumption purchases increase by $200 and U.S.GDP increases by $200.
B)U.S.consumption purchases increase by $200 and U.S.GDP increases by $10,000.
C)U.S.consumption purchases increase by $10,000 and U.S.GDP increases by $10,200.
D)U.S.consumption purchases increase by $10,200 and U.S.GDP increases by $10,200.

Question

Quizplus · Accepted Answer

The purchase of the used car is not included in GDP because it is a transaction of a used good. The purchase of the new radio is included in GDP because it is a purchase of a new good. The radio is made in the U.S., so it is a U.S. consumption purchase. Therefore, U.S. consumption purchases increase by $200 and U.S. GDP increases by $200.

Micah Buys a Used Car for $10,000 and Spends $200