CFA Practice Question

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CFA Practice Question

In 2008, an American taught spoken English in China; he made $30,000 that year. When he came back to the U.S., he brought $25,000 home with him and then bought a new computer for $2,000 and a used car for $12,000. He then deposited the rest of the money in his bank account. Through the series of transactions, the amount counted towards U.S. GDP should be ______.
A. $0, since he did not make the money in the U.S.
B. $2,000
C. $14,000
Explanation: The income was not generated within the borders of the United States. However, the purchase of the new computer counted towards U.S. GDP; the purchase of the used car did not.

User Contributed Comments 10

User Comment
matzaala GDP = Income generated within the borders of the US

GNP = Income generated by US Citizens domestically and abroad
RNAN His transactions counted towards 2,000 of US GDP. The explanation given confirms this.
kevinf12 Why does the Used car not count towards GDP?
SalmaM Transactions of used goods don't contribute to GDP in the current year
dblueroom because this used car was not produced during the year. Does this make the car an intermediate good?
Profache Used cars were already included in the GDP of the year which they were made.
ColonelCFA The Question ask what "SHOULD" be counted. Since none of the money was made in the US none of the purchases "SHOULD" be included in GDP. Although the explanation concedes that the new computer WILL be included in GDP.
Vedo think of it as an export the guy bought a US computer with foreign money, so it counts toward gdp, the used car does not since GDP only includes new stuff.
choas69 GDP expenditure approach income approach and CFA approach
parkjihoon the used car got me
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