Question

You are informed that you have won $3,000,000 in the New Jersey State Lottery, to be paid to you, in total, immediately. Which of the following best explains how this transaction would be recorded under the expenditure approach to calculating GDP?

A. a $3,000,000 increase in consumption and a $3,000,000 increase in government spending.
B. $3,000,000 increase in consumption.
C. no change in GDP.
D. a $3,000,000 increase in wages.
E. a $3,000,000 increase in domestic value added.

Answer 1

The correct answer to this question would be C. no change in GDP.

Step-by-step explanation:

When considering the expenditure approach to calculating GDP, it is important to understand that GDP is the total value of all final goods produced and services provided within a country during a specific period. A lottery winnings payment doesn't count as production or a service, nor does it involve government expenditures on goods and services.

Therefore, receiving a lottery win would not be included in GDP calculations. The lottery winnings represent a transfer payment, which simply moves funds from the government to an individual without any new production of goods or services.