<p>You're right when both Tom Hanks and FedEx buy a new jet. If Tom Hanks buys the jet then the expenditure contributes to consumption, if FedEx buys the jet then the contribution contributes to investment.</p>
<p>Transactions involving second-hand goods (also referred to as existing assets or existing goods) are more complicated. If Tom Hanks bought a used jet from Steven Spielberg then there would be no change to GDP. However, if Tom Hanks bought a used jet from second-hand-jets.com then then there would be a GDP increase but only for the retail margin - not the value of the jet.</p>
<p>The retail margin is the difference between the price the dealer purchased the secondhand asset and the price the dealer sold the asset. This is because businesses which deal in second-hand goods are seen as adding retail value. Recall, GDP can be interpreted as the sum of all value added in an economy in a given period. We can also interpret GDP as the sum of all incomes in an economy, the retail margin is split between employee wages and the company owners return on capital.</p>
<p>There's a <a href="https://www.bea.gov/resources/methodologies/nipa-handbook/pdf/all-chapters.pdf#page=135" rel="nofollow noreferrer">technical note</a> in the National Income and Product Accounts (NIPA) handbook which covers the difference between new and used motor vehicle sales in more depth.</p>

CC BY-SA 4.0
2024-10-14T16:57:03.220Z
Thank you so much for clearing it up to me!!!
runtotherescue
CC BY-SA 4.0
2024-10-13T12:32:12.177Z
2024-10-13T12:32:12.177Z
williams-ji
<p>I'm taking a Macroeconomy course this semester - we have only covered the mere basics and I'm struggling to grasp how GDP changes when an individual/ a company buys something. I'll state three similar situations that vary and confuse me in some parts.</p>
<ol>
<li><strong>If Tom Hanks buys a private jet from a Greek airline, the Greek GDP increases in the export section</strong></li>
</ol>
<ul>
<li>I absolutely understand this concept.</li>
</ul>
<ol start="2">
<li><strong>If Tom Hanks buys a private American jet - the GDP increases in the consumption section.</strong></li>
</ol>
<ul>
<li>My question here  is : Why does the American GDP increase? If he buys a jet from a company that produces jets, then I can understand that. But if he buys a jet from an American airline - the American GDP won't increase, right? Because it falls within the 'selling &amp; buying used goods' so the jet was already counted in the GDP, right?</li>
</ul>
<ol start="3">
<li><strong>If FedEX buys an American jet, it increases the American GDP because it's an investment.</strong></li>
</ol>
<ul>
<li>Is this a correct statement? I would like to think so since GDP is composed of Consumption, Investment, Export-Import &amp; Government spending.</li>
</ul>
<p>If anybody here could clear 2) and 3) up for me, I would be incredibly grateful.</p>

<macroeconomics><gdp>
How does GDP change when a company buys a jet
runtotherescue
# How does GDP change when a company buys a jet

(Asked by: username_0 on 2024-10-12)

I'm taking a Macroeconomy course this semester - we have only covered the mere basics and I'm struggling to grasp how GDP changes when an individual/ a company buys something. I'll state three similar situations that vary and confuse me in some parts.

1. **If Tom Hanks buys a private jet from a Greek airline, the Greek GDP increases in the export section**

* I absolutely understand this concept.

2. **If Tom Hanks buys a private American jet - the GDP increases in the consumption section.**

* My question here is : Why does the American GDP increase? If he buys a jet from a company that produces jets, then I can understand that. But if he buys a jet from an American airline - the American GDP won't increase, right? Because it falls within the 'selling & buying used goods' so the jet was already counted in the GDP, right?

3. **If FedEX buys an American jet, it increases the American GDP because it's an investment.**

* Is this a correct statement? I would like to think so since GDP is composed of Consumption, Investment, Export-Import & Government spending.

If anybody here could clear 2) and 3) up for me, I would be incredibly grateful.

**Tags:** macroeconomics, gdp

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## 1 answers

### Answer by username_1 on 2024-10-13. Score: 3 | Accepted answer

You're right when both Tom Hanks and FedEx buy a new jet. If Tom Hanks buys the jet then the expenditure contributes to consumption, if FedEx buys the jet then the contribution contributes to investment.

Transactions involving second-hand goods (also referred to as existing assets or existing goods) are more complicated. If Tom Hanks bought a used jet from Steven Spielberg then there would be no change to GDP. However, if Tom Hanks bought a used jet from second-hand-jets.com then then there would be a GDP increase but only for the retail margin - not the value of the jet.

The retail margin is the difference between the price the dealer purchased the secondhand asset and the price the dealer sold the asset. This is because businesses which deal in second-hand goods are seen as adding retail value. Recall, GDP can be interpreted as the sum of all value added in an economy in a given period. We can also interpret GDP as the sum of all incomes in an economy, the retail margin is split between employee wages and the company owners return on capital.

There's a [technical note](https://www.bea.gov/resources/methodologies/nipa-handbook/pdf/all-chapters.pdf#page=135) in the National Income and Product Accounts (NIPA) handbook which covers the difference between new and used motor vehicle sales in more depth.

> **Comments:**
> **username_0**: Thank you so much for clearing it up to me!!!  

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