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The purchase of a used house in 2019Q2 (a) enters the 2019Q2 GDP as an amount equal to the price...

Question:

The purchase of a used house in 2019Q2

(a) enters the 2019Q2 GDP as an amount equal to the price paid for the house.

(b) and any new material purchased for its improvement in that quarter enter the 2019Q2 GDP.

(c) does not enter the 2019Q2 GDP, neither does any new material purchased for its improvement.

(d) does not enter the 2019Q2 GDP, but any new material purchased for its improvement in that quarter does.

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the market value of all final goods and services produced by a country in given period, i.e., a year. It includes only the value of final good produced in current year. The transaction of second hand goods are not included in current year GDP.

Answer and Explanation:

Ans: Does not enter the 2019Q2 GDP, but any new material purchased for its improvement in that quarter does.

Explanation

The house was already purchased in the past year when it was new and initially purchased. It's value was already included in that year's GDP. But now it is a used house. The amount of expenditure done (i.e., raw material cost, labor costs, etc) for the improvement of the house only be included in 2019Q2 GDP.

Thus, option d is correct answer.


Learn more about this topic:

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Gross Domestic Product: Definition and Components

from Economics 102: Macroeconomics

Chapter 4 / Lesson 3
65K

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