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If you buy a new car, the entire purchase is counted as consumption in the year in which you make the transaction. Explain briefly why this is in one sense an “error” in national income accounting. (Hint: How is the purchase of a car different from the purchase of a pizza?) How might you correct this error? How is housing treated in the National Income and Product Accounts? Specifically how does owner occupied housing enter into the accounts? (Hint: Do some Web searching on “imputed rent on owner occupied housing.”)
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