Final answer:
GDP includes the total dollar value of new goods and services within a country but excludes non-market transactions, resale of goods, and the value of individual inputs. Hospital stays, child care from licensed centers, and new car sales are included; life expectancy changes, unpaid child care, and used car sales are not.
Step-by-step explanation:
GDP Inclusions and Exclusions
When calculating Gross Domestic Product (GDP), certain items are included while others are not. GDP represents the total dollar value of all goods and services produced over a specific time period within a country. It is an important indicator of the economic health of a country. The following breakdown offers an explanation of what is included or excluded from GDP calculations:
- a. The cost of hospital stays: Included, as it is a payment for a service.
- b. The rise in life expectancy over time: Excluded, as it is not a market transaction.
- c. Child care provided by a licensed day care center: Included, as it is a service paid for in the market.
- d. Child care provided by a grandmother: Excluded, as it is not a paid market transaction.
- e. A used car sale: Excluded, as it does not represent production of new goods.
- f. A new car sale: Included, as it is the sale of a new good within the reporting period.
- g. The greater variety of cheese available in supermarkets: Excluded, variety by itself is not quantifiable as a market transaction.
- h. The iron that goes into the steel that goes into a refrigerator bought by a consumer: Excluded as an individual input, but the final sale of the refrigerator is included.
It is important to note that for the calculation of GDP, the emphasis is on the monetary value of goods and services that are newly produced and sold legally in the market.