Question

You buy 100 shares in XYZ Corporation on the Internet and your broker charges you $29.95.

What effect will this have on GDP?

A. This will increase the investment component of GDP and therefore overall GDP.

B. This has no effect on GDP.

C. This will increase GDP by $29.95.

D. This will increase GDP by the cost of the shares minus $29.95.

E. This will increase GDP by the cost of the shares plus $29.95.

Answer 1

The purchase of shares and the broker fee have no effect on GDP.

Step-by-step explanation:

The effect of buying 100 shares in XYZ Corporation and paying a broker fee of $29.95 will have no effect on GDP (option B). The purchase of shares is considered a financial transaction and does not directly contribute to the production of goods and services in the economy, which is what GDP measures. GDP consists of consumption (C), investment (I), government spending (G), and net exports (X-M), and buying shares falls under the financial sector and is not counted as investment in GDP. Therefore, the correct answer is B - this has no effect on GDP.