Question

Since we use GDP to determine a nation’s health, we can only add the market value of the goods and services produced in the United States (domestic production) for a single year. We also do not add the value of intermediate goods, ingredients/items used to produce final products. We only count the value of final goods and services which have been produced within the year. Including the value of both the intermediate goods and the final goods and services would lead to double counting and increase the value of GDP.Directions: For each item place either an "I" if the scenario is an intermediate product, or an "F" if it is a final product.

a. Shampoo is bought and used by a hair stylist in the mall.
b. A family buys some finger paint for their child to use.
c. A person buys a tire to replace to flat one on their car.
d. A hotel chain buys a box of pens.
e. Flour is bought and used to bake a cake to be sold at a bakerySomeone buys a steak to grill at home.
f. An accounting firm buys calculators for its accountants.
g. A person buys shampoo to use at home.
h. Flour is bought and used to bake a cake for a birthday.
i. A student buys a pack of pens to do their homework.
j. A restaurant prepares a steak for its customers.
k. A factory buys tires to place on their cars.
l. An artist buys paints for a painting, with the intention of keeping it.
m. A calculator is bought and used for mathematics homework.
n. An artist buys paints for a landscape painting, with the intention of selling it.

Answer 1

a. Shampoo is bought and used by a hair stylist in the mall. - F

It is a final product bought by the final consumer (the hair sytlist). It is part of GDP.

b. A family buys some finger paint for their child to use. - F

It is a final product bought by the final consumer (the family). It is part of GDP.

c. A person buys a tire to replace to flat one on their car. - F

It is a final product bought by the final consumer (the person who will replace the flat tire). It is part of GDP.

d. A hotel chain buys a box of pens. - F

It is a final product bought by the final consumer (the hotel). It is part of GDP.

e. Flour is bought and used to bake a cake to be sold at a bakerySomeone buys a steak to grill at home. - I

It is an intermediate product, because the flour will be made into cakes, that will then be sold, taking into account the value of the flour itself. It is not part of GDP.

f. An accounting firm buys calculators for its accountants. - F

It is a final product bought by the final consumer (the firm). It is part of GDP.

g. A person buys shampoo to use at home. - F

It is a final product bought by the final consumer (the person). It is part of GDP.

h. Flour is bought and used to bake a cake for a birthday. - F

It is final good because the flour will be made into a birthday cake, but the cake will be conumed at home. If the birthday cake is later sold, then, the flour is an intermediate good.

i. A student buys a pack of pens to do their homework. - F

It is a final product bought by the final consumer (the student). It is part of GDP.

j. A restaurant prepares a steak for its customers. - F

The steak is a final product, it will be consumed by customers for a value that the restaurant has set. This value is part of GDP.

k. A factory buys tires to place on their cars. -I

The tires are intermediate goods because they will be put in cars that they factory will later sell. The tires are not part of GDP.

l. An artist buys paints for a painting, with the intention of keeping it. - F

The painting is a final good because they customer has bought it to keep it a home. It is part of GDP.

m. A calculator is bought and used for mathematics homework. - F

It is a final product bought by the final consumer (the person doing math work). It is part of GDP.

n. An artist buys paints for a landscape painting, with the intention of selling it. - I

The paints are intermediate because their value will be put into the making of the landscape painting, which will be sold for a price that will take into account the cost of the paints. The paints are not part of GDP.