Chapter 05 : Measuring a Nation's income

Question 1

Samsung produce a smartphone in Novemver 20X6, and sell it to Walmart in August 20X7 for $600. Walmart sell it to a household in January 20X8 for $900. In the GDP accounts for 20X6, the smartphone appears as a(n) :

(1) Investment of $600
(2) investment of $900
(3) consumption of $600
(4) consumption of $1,500

Answer 1

Samsung produce a smartphone in Novemver 20X6, and sell it to Walmart in August 20X7 for $600. Walmart sell it to a household in January 20X8 for $900. In the GDP accounts for 20X6, the smartphone appears as a(n) :

(1) Investment of $600
(2) investment of $900
(3) consumption of $600
(4) consumption of $1,500

answer (1) Investment of $600
Option (1) is correct because the production of the smartphone in November 20X6 by Samsung is an
investment for 20X6. Walmart’s purpose for buying the smartphone from Samsung in 20X7 is to sell it to
consumers. As they are not consuming the product themselves, the smartphone is considered an
investment. The smartphone is deemed a consumption only in 20X8 when the household finally buys it.