Question

Why is the purchase of a share of stock not included in GDP?

A
Money is not being exchanged when a stock is purchased.
B
A company sells too many stocks for it to be included.
C
The purchase of a share of stock does not correspond to the production of a good or service.

Answer 1

The purchase of stock is not included in GDP because it does not represent the production of goods or services, but rather a financial transaction between shareholders.

Step-by-step explanation:

The purchase of a share of stock is not included in Gross Domestic Product (GDP) because it does not correspond to the production of a good or service. When you buy stock, you are essentially buying a piece of ownership from the current owner, and the company originally issuing the stock is not involved in this transaction and receives no financial return from it. As such, stock transactions are considered financial transactions rather than transactions that add value to goods or services within an economy. GDP only includes market transactions where there's production of new goods and services, such as hospital stays that are part of GDP or a new car that is part of GDP.