If XYZ Corporation buys an original Matisse painting to hang in its board room, then: a. GDP...

Question:

If XYZ Corporation buys an original Matisse painting to hang in its board room, then:

a. GDP decreases by the amount of the purchase because C decreases.

b. GDP increases by the amount of the purchase because I increases.

c. GDP is unaffected because it is a second hand sale.

d. GDP decreases because I decreases.

e. I increases, but C decreases.

Gross Domestic Product:

Gross domestic product (GDP) is the total value of final goods and services produced for the market in an economy over a period of time. GDP is widely used as a measure of standards of living and level of development, but is also subject to criticism.

Answer and Explanation:

The answer is C).

GDP measure only include the final goods and services that is produced within the current year, and hence do not include goods that have been produced before. In this case, the painting is not a new good that is produced this year, and hence is not included in the measure of GDP.


Learn more about this topic:

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Gross Domestic Product: Definition and Components

from Economics 102: Macroeconomics

Chapter 4 / Lesson 3
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