Question

Identify the contribution to this year's GDP by entering a numerical value. Do not enter dollar signs or commas. Joe sells the house he has lived in for 10 years for $200,000 and pays his real estate agent a 6% commission. $ At the end of the semester Brian sells his economics textbook to his friend for $150. $ Company X produces 14 units at a cost of $5 each and sells 12 of them for $5.50 each. $

Answer 1

While calculating the gross domestic product (GDP) the value of only those goods and services are included that have been sold during the year for the first time, in other words value of resale is not included in the GDP calculations.

Part 1) Joe is selling a house for $200,000 that has been purchased 10 years back so this transaction will not be included in the GDP. However, the commission received by the real estate agent is payment for the services delivered during the year so it will be included in the GDP calculation. So, 6% of $200,000 which is $12,000 will be included in the GDP calculations for this year.

Part 2) The books sold by Brian have already been included in the GDP calculation when they were purchased for the first time so including them again when Brian sold them to his friend will be double entry so this transaction will not be included in the GDP calculations for this year.

Part 3) The value of final goods and services are included in the GDP so, in the case of Company X the amount included in the GDP will be Final Price × Quantity Sold i.e., 5.50 × 12 = $66 will be included in the GDP calculations for this year.