Explain why the purchase and sale of used goods and of financial assets are not included in the calculation of GDP even though transactions in these items amount to billions of dollars daily
What will be an ideal response?
GDP measures the value of the goods and services produced in a given year. The key phrase in the definition is "produced in a given year." Used goods are counted in the GDP of the year in which they are produced and so they are not counted if they are bought and sold again. Financial assets, such as buying and selling stocks and bonds, are not production. These transactions are purely financial and are simply the changing of the ownership of assets. Hence neither the purchase nor the sale of used goods nor of financial assets are included in GDP.
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