Explain why the value of GDP in 2009 would or would not change as a result of each transaction described below:
a. In 2009, the Smith family purchases a new house that was built in 2009. b. In 2009, the Jones family purchases a house that was built in 2001.
c. In 2009, a construction company purchases windows to put in the Smith family home that was built in 2009.
d. In 2009, Mr. Jones paints all of the rooms of the Jones family house purchased in 2009.
e. In 2009, Mr. Smith uses an online brokerage service to purchase shares of stock in a construction company.

Question

Quizplus · Accepted Answer

The Answer is a. GDP in 2009 increases by the purchase price of the house, which is a newly produced good.
b. GDP in 2009 does not change because the house is not a newly produced good,
since it was built in 2001. Transactions involving used goods are not included in GDP. c. GDP in 2009 does not change directly because the windows are intermediate goods, not final goods. The value of intermediate goods is not included in GDP to avoid double counting. The value of the windows is implicitly included in the price of the house.
d. GDP in 2009 does not change because home production is not included in GDP.
e. GDP in 2009 does not change because financial transactions do not represent the production of final goods and services and are not included in GDP.

Explain Why the Value of GDP in 2009 Would or Would