Which of the following is included as a component of GDP in the expenditure approach?

• A. The purchase of a new car by a household
• B. A cash gift from one person to another
• C. The purchase of stocks and bonds
• D. The purchase of used furniture at a garage sale

Answer: (A)

Verified step by step guidance

1. Understand that GDP (Gross Domestic Product) measures the total market value of all final goods and services produced within a country in a given period.
2. Recall that the expenditure approach to GDP sums up consumption (C), investment (I), government spending (G), and net exports (NX), i.e., \(GDP = C + I + G + NX\).
3. Identify which transactions count as final goods and services produced in the current period. For example, the purchase of a new car by a household is a final good and part of consumption.
4. Recognize that cash gifts are transfers of money and do not represent production of goods or services, so they are not included in GDP.
5. Understand that purchases of stocks and bonds are financial transactions, not production of goods or services, and used goods (like used furniture) were counted in GDP when first sold, so their resale does not add to current GDP.