Which of the following transactions is included in a country's GDP (measured using the expenditure approach)?

• A. A retiree receives Social Security benefits.
• B. A household buys a newly built home from a construction firm.
• C. A person buys a used car from another person.
• D. A household buys shares of stock in a publicly traded company.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the expenditure approach to GDP, which calculates GDP as the total spending on final goods and services produced within a country during a specific period. The formula is: \(GDP = C + I + G + (X - M)\), where \(C\) is consumption, \(I\) is investment, \(G\) is government spending, and \((X - M)\) is net exports.
2. Step 2: Identify which transactions represent spending on newly produced goods and services. Only purchases of new goods and services count toward GDP because GDP measures current production.
3. Step 3: Analyze each option: Receiving Social Security benefits is a transfer payment, not a purchase of goods or services, so it is excluded from GDP.
4. Step 4: Buying a used car is a transaction involving a previously produced good, so it does not count toward current GDP because it was counted when originally produced.
5. Step 5: Buying shares of stock is a financial transaction, not a purchase of goods or services, so it is excluded from GDP. However, buying a newly built home from a construction firm is an investment in new residential structures and is included in GDP under investment (\(I\)).