Joe sells the house he has lived in for 10 years to the Smith family for $300,000.He receives $50,000 more than his original purchase price 10 years ago.Joe pays his real estate agent a 5 percent sales commission.This transaction will increase gross domestic product (GDP)by
A) $0.
B) $50,000.
C) $15,000.
D) $65,000.
E) $300,000.

Question

Quizplus · Accepted Answer

The real estate agent's commission of $15,000 (5% of $300,000) is the only part of the transaction that contributes to GDP, as it reflects the value of services provided in the current year. The sale of the house itself does not contribute to GDP because it is a transfer of ownership of an existing asset.

Joe Sells the House He Has Lived in for 10