In the expenditure method, which of the following is not included in GDP because it is not expenditure on a final good or service produced during the current year?
Answer and explanation
Correct answer: An individual’s expenditure on purchasing company shares
The purchase of company shares is a financial transaction and does not represent payment for a currently produced final good or service. Thus, the value of the shares is excluded from GDP. A new car is consumption expenditure, public hospital services are government expenditure, and a new machine is investment expenditure. Brokerage or other current financial services connected with the transaction may be counted.
Frequently asked questions
What is the correct answer to this question?
An individual’s expenditure on purchasing company shares
Why is this the correct answer?
The purchase of company shares is a financial transaction and does not represent payment for a currently produced final good or service. Thus, the value of the shares is excluded from GDP. A new car is consumption expenditure, public hospital services are government expenditure, and a new machine is investment expenditure. Brokerage or other current financial services connected with the transaction may be counted.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Expenditure Method.
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