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30 November, 08:48

How much (if any) does each of the following transactions raise GDP?

1. The Jones family sells its old house to the Reynolds family for $130,000.

2. The Jones family then buys a newly constructed house from a builder for $175,000.

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  1. 30 November, 10:41
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    1. 0

    2. $ 175,000

    Total from the two events : $ 175,000

    Explanation:

    GDP in each year only increased if the goods or services are produced within that year. An old house was produced in the past year. The value of that house is already calculated and included in the past GDP. This is why selling an old house do not raise the GDP in the current year.

    Buying a newly constructed house is increasing GDP since it's being produced within the year of GDP period.
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