Angela pays her contractor $900 to build a fence at her house. The contractor spends $600 on wood and nails at the local Home Depot. These two sales increase nominal GDP by $1,500.

Question

Quizplus · Accepted Answer

The $900 paid to the contractor is included in GDP as it is the final sale. The $600 spent on materials is an intermediate cost and is not separately added to GDP to avoid double counting. Thus, the increase in nominal GDP is $900, not $1,500.

Angela Pays Her Contractor $900 to Build a Fence at Her