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

1. Joe sells the house he has lived in for 10 years for $2,00,000. This $2,00,000 will not be included in the GDP because the market value of this house had been already included in the GDP of the year in which it was constructed. So if i will include it in this year too, it would lead to double counting problem. Therefore, $2,00,000 will not be included in the calculation of GDP. Although, the 6% commission would be included in the GDP because this transaction has occured in this year.

So total amount included in the GDP would be equal to 6% of $2,00,000 =( 6/100) × $2,00,000 = $12000.

2. $150 will not be included in the calculation of GDP because it has already been included in GDP when it was first bought by Brian. So to avoid the problem of double counting, $150 is excluded from calculation of GDP.

3. As total finished goods produced by company X are 14 and GDP includes the market value of the finished goods and services. So amount contributed to the GDP would be = 14 × $5 = $70.

​​​​​​Therefore, $70 would be included in the calculation of GDP.