Which of the following would be included as part of the Consumption component of GDP?

Question

BlackTom AI · Accepted Answer

Consumption includes household spending on currently produced goods and services, so payments for services (like real estate agent fees) are counted as consumption.

1) Relevant knowledge points and concepts
- GDP is measured as C + I + G + NX. "C" (consumption) is spending by households on final goods and services produced within the period.  
- Used goods (second-hand goods) themselves are not counted in GDP because they were counted when originally sold.  
- Services produced in the current period (e.g., brokerage fees, legal fees, repair services) are part of consumption if purchased by households.  
- Residential investment (newly built homes) is classified as investment (I), not consumption.  
- Transfer payments (social security, unemployment benefits) are not purchases of goods or services and are excluded from GDP.  
- Business purchases of capital goods (computers for a firm) are business investment, not household consumption.

2) Step-by-step reasoning for each option
a) Real estate agent fees when a family sells a second-hand home: the home sale itself is a transfer of a used good (not counted), but the agent’s fee is a payment for a service produced in the current period. If the household is the buyer or seller of the service, that service is household consumption. Therefore this fee is included in C.  
b) Purchase of a newly built family home: this is newly produced residential housing, so it is counted as residential investment (I), not consumption.  
c) Transfer payments: these are government cash transfers and are not payments for goods or services, so they are excluded from GDP components.  
d) An accounting firm’s purchase of a computer: this is business (firm) investment in capital goods, counted in I, not household consumption.

3) Intermediate steps / clarifications
- Confirm used-good rule: used home sale → only current services (agent fee) count.  
- Classify purchases: household services → C; new residential construction → I; business capital goods → I; transfers → excluded.

4) Why the correct answer is correct
The agent fee is a payment for a service produced in the current period and purchased by a household, which fits the definition of consumption.

5) Why the other options are incorrect (brief)
- b is residential investment, not consumption.  
- c are non-market transfers, excluded from GDP.  
- d is business investment, not household consumption.

6) Conclusion
Option a is correct: the payment of real estate agent fees when a family sells a second-hand home is included in the Consumption component of GDP. This matches the provided answer.

Which of the following would be included as part of the Consumption component of GDP?Single choice

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