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Chapter 19: Problem 10

Is the value of a house built in 2008 and resold in 2019 included in the GDP of 2019 ? Briefly explain. Would the services of the real estate agent who helped sell (or buy) the house in 2019 be counted in GDP for \(2019 ?\) Briefly explain.

Short Answer

Expert verified
No, the value of the house resold in 2019 is not included in the GDP of 2019 as it is not a newly produced good. However, the services of the real estate agent, performed in 2019, are included.

Step by step solution

01

Determining if the resale of the house contributes to the GDP of 2019

Any economic goods or services that were produced in previous years would not be included in the GDP of the current year. Hence, the value of a house built in 2008 and resold in 2019 is not included in the GDP for 2019 because it is not a newly produced good.
02

Determining if the services of the real estate agent contribute to the GDP of 2019

The services of a real estate agent who assisted in selling the house in 2019 would be counted under GDP for 2019. This is because GDP includes the market values of newly produced goods as well as services rendered in a given year. Therefore, even though the house itself (a physical good) does not contribute to the GDP of 2019, the services rendered by the real estate agent in selling the house are to be included in the GDP of 2019.

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Most popular questions from this chapter

Which component of GDP will be affected by each of the following transactions involving the Ford Motor Company? If you believe that a transaction will affect none of the components of GDP, briefly explain why. a. You purchase a new Ford Escape hybrid from a Ford dealer. b. You purchase a 2013 Ford Escape hybrid from a friend. c. Ford purchases door handles for the Escape from an auto parts manufacturer in Indiana. d. Ford produces 1,000 Escapes in a factory in Missouri and ships them to a car dealer in Shanghai, China. e. Ford purchases new machine tools to use in its Missouri Escape factory. f. The state of Missouri builds a new highway to help improve access to the Ford Escape plant.

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Suppose the amount the federal government collects in personal income taxes increases, while the level of GDP remains the same. What will happen to the values of national income, personal income, and disposable personal income?

An article in the Wall Street Journal stated that "GDP figures are a measure of all the goods and services that are produced in an economy during a particular period." Briefly explain whether you agree with this definition of GDP.
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