Final answer:
Transactions like a family buying a new refrigerator or Ford selling a Thunderbird increase GDP's consumption or investment components, respectively, while the purchase of a new house affects investment. Non-market activities, the sale of used goods, or improvements in quality of life do not count towards GDP.
Step-by-step explanation:
When reviewing the components of Gross Domestic Product (GDP), it's important to examine how different transactions impact the equation GDP = C + I + G + (X - M), which represents consumption (C), investment (I), government spending (G), and net exports (X - M). To determine the impact of different transactions on these components, we can review a few examples:
- A family buys a new refrigerator: This transaction would increase the consumption (C) component of GDP as it's a purchase of a good by a household.
- Aunt Jane buys a new house: This would affect the investment (I) component, as the purchase of a new house is considered an investment in residential structures.
- Ford sells a Thunderbird: The sale of a new car by Ford contributes to the investment (I) component, as it's an inventory investment by a business.
It's also beneficial to understand what does not count towards GDP. For example:
- The rise in life expectancy does not affect GDP as it is not a market transaction.
- Child care provided by a grandmother is not included in GDP because it does not involve a monetary transaction.
- The sale of a used car is not counted in GDP since it's not a new production and was counted when initially sold as a new car.
However, certain transactions like the cost of hospital stays, child care provided by a licensed day care center, and a new car sale are included in GDP since they are market transactions that involve new production of goods and services.