Question

In which spending category would you enter the following transaction? Ford sells a Thunderbird from its inventory to an individual.

A) Consumption
B) Consumption and investment
C) Investment
D) Government purchases
E) Net exports

Answer 1

The sale of a Ford Thunderbird from inventory to an individual is categorized as consumption, since it involves a consumer purchase for personal use. This is part of the consumption component in the calculation of GDP.

Step-by-step explanation:

The transaction of Ford selling a Thunderbird from its inventory to an individual falls within the consumption category. When a car is sold to an individual for personal use, it is considered a consumer purchase and thus part of the consumption component of Gross Domestic Product (GDP) in economic terms.

Governments, when calculating GDP, include such consumer purchases in the consumption category, as they represent goods and services directly used by consumers.