ECON 100 Goods and Services Answers

St. Charles Community College
Econ 100     Survey Economics
Answers to Hand-Out Question


Should each of the following enter into a measure of “the market value of all currently produced final goods and services”?

1. the purchase of a new Ford Mustang convertible by Bobby Joe.
Yes.  Because it is the sale of a new  finished good.

2. the gift of the same Mustang convertible from Bobby Joe to Betty Sue.
No.  This is not a recorded sale. Gifts do not count in this case because it is not a recorded sale, and because it was already counted when it was purchased new.

3. the purchase of the same Mustang convertible by “Speedy”  Gonzales at a  back alley sale.
No, for a number of reasons. It was not a recorded sale in a formal marketplace,  it is not a currently produced good, and it was already accounted for when it was new.

4. the purchase of a new Chevy van by the CIA.
Yes.  This is a recorded purchase of a finished good bt a government agency.

5. the services of a driver for the Chevy van hired by the CIA.
Yes.  This is income to the driver.

6. the services of a chauffeur hired by Bobby Joe and Betty Sue on the occasion of their wedding to get them to the bus stop.
Yes and No.  If he was formally hired by Bobby Joe to drive, it counts.  However, if Bobby Joe just slipped his buddy, who just happened to be a chauffeur, $20.00 to get him and his bride to the bus stop, it doesn’t count.

7. the services of Cousin Billy Bob (amateur driver extraordinaire) to drive them to the bus station after their wedding.
No. There is no” formal income” to Billy Bob.  The key word here is “amateur”.

8. the production of a Ford Mustang that remains unsold at the factory.
Yes.  It is an increase in inventory with a finished good.

9. the purchase of a Japanese pickup truck by Billy Bob.
No.  The key to GDP is where the goods are manufactured.  We are assuming here that the Japanese pick-up truck was manufactured in Japan.

10. the use of welfare money by Jimmy Jack to buy a new Dodge Ram pickup truck.
Yes.  This it the purchase of a finished good.  We don’t care where the money came from.

11. the provision of welfare money to Jimmy Jack.
No.  There is no income here, and nothing is produced.  It is strictly an exchange of funds.

12. the use of welfare money to buy a second, but used,  Dodge Ram pickup truck.
No.  There is no new production or income here.

13. the use of welfare money to open a bank account.
No.  Nothing is produced here.  This is simply a transfer of funds.

14. the use of welfare money to buy General Motors stock on the stock exchange.
No.  Nothing is produced here.  This is simply a transfer of funds.

15. the purchase of a new parts delivery van by the local Pontiac dealer.
Yes.  There is the production and sale of finished goods here.

16. the purchase of a Firebird for display in the local Pontiac dealership.
Yes.  There is production of new goods here.

17. the purchase of tires by Bobbie Joe.
Yes.  There is the production and sale of new finished goods here.

18. the purchase of a new Mustang convertible by Guillermo Roberto (an Italian tourist).
Yes.  There is the production and purchase of new U. S. goods here.

19. the purchase, in Italy, of a new Mustang convertible, by Roberto Guiseppi.
Yes.  There is the production and sale of new U. S. finished goods here.  The issue is where it is produced, not where it is sold.

20. the payment for the services of a automobile repairmen hired by Bobby Joe who fails to repair the broken down Ford Mustang.
Yes.  Since there was payment for services, there is income to the service man, even though he botched the job.

21. the payment for the services of the wrecker driver who takes the broken Ford Mustang to the city junk yard.
Yes.  It is income to the wrecker driver.