- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 14. Aggregate Output, Prices, and Economic Growth
- Subject 1. Gross Domestic Product
CFA Practice Question
Which one(s) should be counted toward a country's GDP?
B. An American purchases a Japanese stock in Tokyo.
C. A stockbroker helps an investor buy a portfolio of stocks for $100,000, receiving $800 as commission.
A. An American purchases domestic stocks at NYSE.
B. An American purchases a Japanese stock in Tokyo.
C. A stockbroker helps an investor buy a portfolio of stocks for $100,000, receiving $800 as commission.
Correct Answer: C
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.
The commission is included in GDP since it involves a service.
User Contributed Comments 3
| User | Comment |
|---|---|
| sahinakos | Share sales are excluded even if it is sold with a profit? thanks |
| forry9er | @sahinakos That's correct - Capital Gains are EXCLUDED from GDP. Very comparable to selling a house for a gain. Only commission from the broker would be included in the current year GDP. The house itself would only contribute to GDP in the year it was built. (Remember - GDP has nothing to do with sales and everything to do with PRODUCTION) |
| forry9er | Slight correction above - The House Price WOULD be considered into the GDP, just not under consumption, but instead under fixed investment. Sorry for confusing anyone! |