CFA Practice Question
Which one should be counted toward U.S. GDP?
B. Your uncle gives you $1,000 to pay for your college expenses.
C. A Vietnam veteran receives veteran's payments from the federal government.
A. An American purchases a Japanese stock in Tokyo.
B. Your uncle gives you $1,000 to pay for your college expenses.
C. A Vietnam veteran receives veteran's payments from the federal government.
Correct Answer: None of these amounts should be counted toward GDP.
A: Financial transactions are excluded from GDP since they don't involve production. They merely transfer ownership from one party to another. It does not matter where such transactions happen.
B: Income transfers are excluded from GDP since they don't involve production. Your uncle will have less wealth and you have more; the net effect is zero - the transaction adds nothing to current production.
C: Income transfers again. The veteran is not producing any goods in return for this money (although he served in the war).
User Contributed Comments 7
| User | Comment |
|---|---|
| shin7011 | payment itself to college education service is production? |
| asalas | Education would be an output (a service), so paying for it would be included in GDP, but the scope of the question involves just the transfer between the uncle and the student. |
| To-be-CFA | A: Financial transfers B: Income transfers C: Income transfers |
| ascruggs92 | They couldn't add a "D. None of the Above" to avoid confusion? |
| Vlz2103 | second ascruggs's comment |
| LoweJoseph | I third ascrugg's comment. |
| ashish100 | ^^^ Weaksauces. |