Question

An internet company gives their old computer system to the computer science

department at a local high school. How would GDP be impacted?

A. GDP would decrease.

B. GDP would increase

C.GDP would stay the same.

Answer 1

Step-by-step explanation:

The formula for GDP is

GDP = C + I + G + NX

C = consumption

I = Investment by business and household purchases by individuals

G = Government Expenditures

NX = foreign trade.

The first thing you can do is knock out foreign trade.

I think you can dispense with Government expenditures as well all though a school is an arm of government.

I think investment is what you have to look at carefully because it does include charitable organizations. We'll come back to this.

Consumption is what it sounds like it sounds.

You can't answer this in any other way than to know how the company writes it off. It is an asset that goes from some value to 0. It no longer exists on their books. So it decreases their assets. It is balanced on their books by calling it an expense I think and that further has impact on their books.

So they are decreasing their value (albeit by a small amount -- they've already bought new computers).

I'm not sure about this, but I think what has happened is that the GDP is going to go down. Their investment has decreased by being written off.